tag:blogger.com,1999:blog-188673752016-12-08T13:28:21.081+01:00The Angel VCThoughts on Internet startups, SaaS and early-stage investing from Christoph Janz @ Point Nine Capital.Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.comBlogger169125tag:blogger.com,1999:blog-18867375.post-58816258726762306442016-11-23T23:36:00.000+01:002016-11-25T09:13:21.916+01:003 (free) tools to help SaaS founders with their 2017 planning<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-33E2YghQJvI/WDYju8186GI/AAAAAAAAAhw/O6-n9Qvlz2EIbamQOFzCJ04QA1PIWp-MwCLcB/s1600/placeit.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://1.bp.blogspot.com/-33E2YghQJvI/WDYju8186GI/AAAAAAAAAhw/O6-n9Qvlz2EIbamQOFzCJ04QA1PIWp-MwCLcB/s320/placeit.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">(As you can see, I really like placeit.net :) )</td></tr></tbody></table>In case you haven't started to think about your plan for 2017 yet, now's the time. To help you a little bit with your planning, here are three little tools that you might find useful. If you're a long-time reader of this blog, you may have seen them before.<br /><br /><b><span style="font-size: large;">1. Growth Calculator</span></b><br /><br />This little tool allows you to enter your MRR as of the end of 2016 and a target growth factor for 2017. It then calculates your MRR target for the end of 2017 and shows you three different growth paths that lead to that goal. One is based on linear growth, one on exponential growth and the third one shows a trajectory between the linear and the exponential path.<br /><br /><ul><li><a href="https://docs.google.com/spreadsheets/d/1ldYawoy1NAdX8HdHvTsnqn2niEaa5egr4qlAm6HSUyE/edit?usp=sharing" target="_blank">Growth Calculator</a>&nbsp;</li><li><a href="http://christophjanz.blogspot.com/2015/12/a-simple-tool-to-improve-your-2016.html" target="_blank">Original blog post</a>&nbsp;from last year with some additional notes</li></ul><br /><div>Please note that although this Google Sheet may <i>look</i> a bit like a financial plan, it's not meant to <i>be</i> your plan.&nbsp;:) To create a credible and realistic plan, you need to have a "bottom-up" projection of your growth drivers (e.g. your conversion funnel, distribution channels and sales team quotas). &nbsp;What this little calculator can do is quickly give you a sense for how much MRR you have to add each month in 2017 in order to reach your growth targets, so you can use it to play around with different scenarios and assumptions.<br /><br /><span style="font-size: large;"><b>2. Sales Team Hiring Plan</b></span><br /><br />This tool helps you find out how many sales people you need to hire in 2017 based on your growth targets and other import inputs such as your MRR churn rate, &nbsp;your sales team's quota, ramp-up times, etc.<br /><br /><ul><li><a href="https://www.dropbox.com/s/a198p4w8yjese30/SaaSSalesTeamHiringPlan2017.xlsx?dl=0" target="_blank">Sales Team Hiring Plan</a></li><li><a href="http://christophjanz.blogspot.com/2015/06/by-time-youre-at-2-3m-in-arr-you-need.html" target="_blank">Original blog pos</a>t with some additional background</li></ul><div><br />The model is based on an exponential growth path (i.e. #2 from the Growth Calculator above), i.e. it works with a constant m/m growth rate, which you can set in cell D11 and D12 for 2017 and 2018, respectively. You can easily adjust this to a different growth path by changing row 22 accordingly.<br /><br />One of the things which the model doesn't take into account is employee turnover. In sales teams, employee churn can be significant, both because not every sales person that you hire will work out and because the average tenure of an AE might be only, say, two years. When I tried to add this to the model it became too complex for what I think should stay a pretty simple template. I might give it another go later. In the meantime, I'd recommend that when you build your own hiring plan, assume that if you need x AEs you'll have to hire n*x AEs, and that n is probably something between 1.1 and 2, depending on how good you are at hiring salespeople.<br /><br /><b><span style="font-size: large;">3. Financial Plan</span></b><br /><br />This template helps you create a full financial plan that includes everything from revenue modeling to costs projections and headcount planning. If you look at it for the first time, it might look a little terrifying. I did try to keep it as simple as possible, but if you prefer a simpler version I also have an older, less sophisticated alternative.<br /><br /><ul><li><a href="https://www.dropbox.com/s/1pbdqraz6tke84u/SaaSFinancialPlan2.0.xlsx?dl=0" target="_blank">SaaS Financial Plan 2.0</a></li><li><a href="http://christophjanz.blogspot.com/2016/03/saas-financial-plan-20.html" target="_blank">Notes on the 2.0 version</a></li><li><a href="https://docs.google.com/spreadsheets/d/1DA2W_MShVOhErdNk-429vq02MqNMqM1kYLk7bwjGEhg/edit" target="_blank">SaaS Financial Plan 1.0</a> (the original, simpler version)</li><li><a href="http://christophjanz.blogspot.com/2012/03/financial-planning-for-saas-startups.html" target="_blank">Notes on the 1.0 version</a></li></ul><div><br /></div><div>I hope you find some of this useful. Happy planning!</div></div></div><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-55860110088779891802016-09-19T00:20:00.001+02:002016-09-21T11:35:55.330+02:00Should you take small checks from deep pockets?So you’ve recently started a company, you’ve started to talk to angel investors and seed funds about your seed round, and suddenly a large VC appears on the scene and wants to invest. What should you do?<br /><br />First of all, congrats. If a large fund wants to invest in your startup, that’s a great validation. Second, if you can get the brand, credibility, network and support of a Tier 1 VC into your startup early on, that can be extremely beneficial. So you should definitely consider it. It’s a complicated question, though, and you have to carefully consider the pros as well as the cons.<br /><br />In this post I’ll try to shed some light on this question. As a disclosure and caveat, being a <a href="http://www.pointninecap.com/">seed VC</a> I’m not a disinterested observer, since we occasionally compete with bigger funds on seed deals. I’ll try to be as unbiased as possible, and if you disagree with my views you’re more than welcome to chime in, e.g. in the comments section.<br /><br />Further below is a simple matrix that might be helpful to founders as they consider having a large fund participate in their seed round. But first, in case you’re not familiar with the issue, here’s a quick primer. If you know what the “signaling risk” debate is about, you can skip the next fext few paragraphs.<br /><br />Some years ago, many large VCs – $200-400M+ funds that typically invest anything from $5M to $20M or more in Series A/B/C rounds – started to make seed investments, placing a sometimes large number of oftentimes tiny bets in very early-stage companies. The intention behind these investments is not to make a great return on these initial bets. Consider a $400M fund that invests, say, $250k in a startup. Even if that investment yields a rare and spectacular 100x return, it means only $25M in exit proceeds for the fund. That’s a lot of money for you and me, but not a lot of money for a $400M fund that needs around $1.2-1.5B of exit proceeds to deliver a good return to its LPs. If a large fund writes a tiny check (i.e. tiny relative to the size of the fund), there’s almost zero chance that the investment will move the needle for the fund.<br /><br />So what <em>is</em> the intention behind these investments? The answer is access to Series A rounds. The idea is that one invests, say, $250k in 50 companies, watch them carefully and then try to lead (and maybe pre-empt) the Series A rounds of the ones that do best. Even if most of these seed bets don’t work out – as long as the VC gained access to a handful of great Series A deals, it’s money well spent. At least superficially it makes a lot of sense for large VCs to employ such a strategy. Whether it’s also a good strategy in the long run, or if it leads to brand dilution and eventually adverse selection, is a different question and beyond the scope of this post.<br /><br />For entrepreneurs, more VCs investing into seed rounds means easier access to capital. And as mentioned before, founders who raise a seed round from a large VC also get the benefit of getting a brand name VC on board early on and potentially they can tap into the firm’s support network. So far, so good - sounds like a win/win.<br /><br />The downside of taking a small check from a large investor is what’s called “signaling risk”. What this refers to is the situation that arises when you want to raise your Series A round and your VC doesn’t want to lead. In that case, any outside investor who you’re talking to will wonder why your existing investor – who as an insider has or could have a great understanding of the business – doesn’t want to invest. Everybody in the market knows that if a large VC invests small amounts the purpose is optionality, so if the VC then doesn’t try to seize the option, people will wonder why.<br /><br />There might be good reasons why your VC doesn’t want to invest despite the fact that your company is doing well, and you might still be able to convince other investors to take the lead. But as you can imagine, it won’t be easy: Investors see large numbers of potential investments and have to decide quickly and based on incomplete information which ones they take a closer look at. That’s why they are highly receptive to any kind of signal. If they hear that the large VC who did the seed round doesn’t want to do the Series A, they might not even want to take the time to dig in deeper and might pass right away. As Chris Dixon <a href="http://cdixon.org/2010/03/12/the-importance-of-investor-signaling-in-venture-pricing/">wrote in a post</a> some years ago, “If Sequoia gave you seed money before but now doesn’t want to follow on, you’re probably dead.”<br /><br /><strong>Long story short, raising a seed round from a large VC has clear upside but also big risks. How should founders decide? </strong><br /><br />Let’s look at the data. <a href="https://www.cbinsights.com/blog/signaling-risk-venture-capital/" target="_blank">CBInsights has some very interesting data</a> which shows that statistically, startups that raised a seed round from a large VC have a <em>higher</em> chance of raising a Series A later on. What the data doesn’t tell us is whether that is (A) because these startups benefitted from having a large VC on board early on or (B) because they were better companies than the average seed startup in the first place. Since the analysis was based on ca. twenty Tier 1 VCs – Benchmark, Sequoia, Union Square etc. – I believe there’s no question that the subset of startups that received seed funding from one of these firms is of much higher quality than the overall average. These firms all have massive deal-flow and are the best firms in the industry. They know how to pick well. I’m sure both (A) and (B) play a role, but since we don’t know the relative impact of the two factors, the statistics don’t answer the question.<br /><br />Another, maybe more helpful way of looking at it is this:<br /><br />1) Does the VC <strong>act with conviction</strong> or does he/she just want a <strong>cheap option</strong>, <a href="http://freddestin.com/2015/07/signalling-seed-rounds.html">as Fred Destin put it</a>.<br /><br />2) <strong>How confident </strong>are you that you’ll have strong traction by the time you want to raise your Series A?<br /><br />Putting these two factors together gives you a simple matrix:<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://2.bp.blogspot.com/-kzujbNAAg58/V98N1oXIKbI/AAAAAAAAAhY/YHem7mVZTS8E0iETAxDQwe9QV9LkTsPPwCLcB/s1600/SmallMoneyDeepPockets_001_png.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="342" src="https://2.bp.blogspot.com/-kzujbNAAg58/V98N1oXIKbI/AAAAAAAAAhY/YHem7mVZTS8E0iETAxDQwe9QV9LkTsPPwCLcB/s640/SmallMoneyDeepPockets_001_png.png" width="640" /></a></div><br /><br />Here’s how to read the matrix:<br />&nbsp; <br /><ul><li><strong>Top left:</strong> If the level of conviction of BigVC (at the time of the seed investment) is high and your traction (by the time you want to raise your next round) is extremely poor, there’s a chance that BigVC will put in some more money (to give you a chance to figure it out, turn things around, pivot,...). It’s not very likely, but since it’s easier for a large VC than for small investors to finance your company for another six months or so, having a large VC on board might be advantageous if you end up in this cell of the matrix. Based on this logic, my verdict for this scenario is slightly <strong>positive</strong> (that is, if you expect to end up in this cell, take money from BigVC).</li><li><strong>Bottom left: &nbsp;</strong>If the level of conviction of BigVC is low and your traction is extremely poor, BigVC will most likely not give you more money and probably nobody else wants to invest neither. In this case, the fact that you’ve raised money from a large VC probably doesn’t matter, but it further reduces the chances of raising from other investors. My verdict: <strong>Slightly negative</strong>.</li><li><strong>Top middle:</strong> In the high-conviction / OK-ish traction scenario there’s a decent chance that BigVC will finance the company through a few iterations or pivots, something that is harder to do without a big investor on board. On the flip side, if BigVC does <em>not</em> invest in this scenario, that will create a very bad signal (as explained above) and greatly reduce your chances to raise from other investors. My verdict: Hard to predict, it can go both ways, so let’s say <strong>neutral</strong>.</li><li><strong>Bottom middle:</strong> If BigVC invested with little conviction and your traction is OK but not great, it’s very likely that BigVC will not invest further. This is extremely problematic as it creates a bad signal (as explained above) and greatly reduces your chances to raise from other investors. My verdict: <strong>Strongly negative</strong>.</li><li><strong>Top right and bottom right: </strong>If you have excellent traction, everything else doesn’t matter that much. If BigVC wants to lead or pre-empt your round, you might save a lot of time (but you might not get the best valuation). If BigVC doesn’t want to invest for some reason, you’ll find other investors, but it will be harder. My verdict: <b>Slightly positive for high-conviction, slightly negative for low-conviction</b>.</li></ul><br />If you’ve read until here and you’re more confused than when you started to read, here’s the take-away of the analysis:<br /><br />If the big VC who wants to invest in your seed round acts with little conviction, i.e. he/she really just wants a cheap option, you’re better off saying no regardless of what kind of traction you expect to have by the time you raise the next round. There’s very little upside but very strong downside. So if you have the opportunity to raise a small amount from a large VC and you know that the fund places dozens or maybe even hundreds of these bets, my advice is to say no.<br /><br />If the big VC acts with strong conviction, there’s strong upside but also significant risk. In this case I don’t have a general advice, and the right decision depends on the level of conviction of the VC and on the value-add that he/she delivers. There are a few things you can do to to find out more about the strategy and value-add of the investor. First, ask the investor how many seed deals the firm has done in the last years and in how many of these cases they led or strongly participated in the A-round. Second, talk to a number of founders who have received a seed investment from the firm and ask them how it's like to work with the firm. Keep in mind that however you decide, it's an extremely important and irreversible decision - so think through it carefully and do your due diligence.<br /><br /><br /><br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-42126797610298437612016-07-16T00:13:00.000+02:002016-07-16T00:13:07.382+02:00From "A as in Amiga" to "Z as in Zendesk"In the last few weeks I participated in a few interviews/discussions to talk about SaaS, entrepreneurship, venture capital and related topics that are near and dear to my heart. If you're interested in me rambling about some of my earliest entrepreneurial adventures (hint: C64, Amiga,...) and how I found Zendesk (hint: luck), and if you don't mind listening to a heavy German accent and lots of "UMs" and "HMMs", here you go. :-)<br /><br /><b>1. The Twenty Minute VC</b><br />Listen to the podcast on <a href="https://www.producthunt.com/podcasts/saastr-036-christoph-janz-co-founder-point-nine-capital" target="_blank">ProductHunt</a>, in <a href="http://bit.ly/theofficialsaastrpodcast" target="_blank">iTunes</a> or download the <a href="http://traffic.libsyn.com/saastr/36_SaaStr_036-_Christoph__Point_Nine_Capital.mp3" target="_blank">MP3</a>.<br /><br /><b>2. "Managing your startup with data" at B2B Rocks in Paris</b><br /><br /><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/HJiHCx2f_Bg" width="560"></iframe><br /><br /><br /><b>3. Interview with Seedcamp's Carlos Espinal&nbsp;</b><br /><br /><iframe frameborder="no" height="450" scrolling="no" src="https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/273661147&amp;auto_play=false&amp;hide_related=false&amp;show_comments=true&amp;show_user=true&amp;show_reposts=false&amp;visual=true" width="100%"></iframe> <br /><br />Thanks to <a href="https://twitter.com/HarryStebbings" target="_blank">Harry</a>, <a href="https://twitter.com/cee" target="_blank">Carlos</a> and <a href="https://twitter.com/alexd" target="_blank">Alexander</a>&nbsp;for inviting me!<br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-22377842907726861732016-06-26T01:50:00.001+02:002016-06-26T01:51:58.084+02:00A better way to visualize pipeline development? (WIP)When founders show me their sales pipeline, the data is typically visualized in some variations of one of these formats:<br /><div><br /><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://4.bp.blogspot.com/-ux_za76P64w/V28AjiQSPbI/AAAAAAAAAfc/Ty0Ne0sDb7Qe9TrCyKQI8M0LAVa-jqF7wCLcB/s1600/trendinpipeline2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="236" src="https://4.bp.blogspot.com/-ux_za76P64w/V28AjiQSPbI/AAAAAAAAAfc/Ty0Ne0sDb7Qe9TrCyKQI8M0LAVa-jqF7wCLcB/s400/trendinpipeline2.jpg" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://3.bp.blogspot.com/-XQhNyJX2VxQ/V28AsKOxU9I/AAAAAAAAAfk/0lqz-aQsXMgo2MqGq9BWpjKL_vOOfc-mwCLcB/s1600/sugarcrm-pipeline-dashboard.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="200" src="https://3.bp.blogspot.com/-XQhNyJX2VxQ/V28AsKOxU9I/AAAAAAAAAfk/0lqz-aQsXMgo2MqGq9BWpjKL_vOOfc-mwCLcB/s400/sugarcrm-pipeline-dashboard.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://4.bp.blogspot.com/-ex4F5rwcfxs/V28AwSWYoHI/AAAAAAAAAfs/RuM1jpQ0_d81taJmahrs2pPOtpTQf-6cgCLcB/s1600/Pipeline-History3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="255" src="https://4.bp.blogspot.com/-ex4F5rwcfxs/V28AwSWYoHI/AAAAAAAAAfs/RuM1jpQ0_d81taJmahrs2pPOtpTQf-6cgCLcB/s400/Pipeline-History3.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">When I see charts like this, I often find it hard to quickly wrap my head around the data and draw meaningful conclusions. Sometimes, important numbers are missing altogether. In other cases, they are there but are shown on another page or in another report.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">I then find myself wonder about questions such as:</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"></div><ul><li>The pipeline is growing nicely, but how much are they actually closing?</li><li>How long does it take them to move leads through the funnel?</li><li>Are they purging their pipeline or are they accumulating a lot of "dead" pipeline value?</li></ul><div><br /></div><div>With this in mind I tried to come up with a new way for high-level pipeline development visualization, one that makes it easier to quickly get to the key take-aways. If you're interested in the (preliminary) result only, <a href="http://i.imgur.com/vOHMjnY.png" target="_blank">check out this mockup</a>. If you'd like to learn more about my thought process and some additional details, read on.</div><div><br /></div><div>The key problem that I have with the standard ways of looking at pipeline development is that it's hard to follow how deals move through the funnel. I've always thought that pipeline development charts should work a bit more like a cohort analysis that allows you to follow a customer cohort's development over time, and so I mocked up this:</div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://2.bp.blogspot.com/-d1om1WfeAAQ/V28J9SgHn4I/AAAAAAAAAgA/Ct8AJWEZ-bwM1JwKXnmE8qTUp3fRIbdVQCLcB/s1600/PipelineVizStep1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="https://2.bp.blogspot.com/-d1om1WfeAAQ/V28J9SgHn4I/AAAAAAAAAgA/Ct8AJWEZ-bwM1JwKXnmE8qTUp3fRIbdVQCLcB/s400/PipelineVizStep1.png" width="351" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">The "pipes" give you a better understanding of what happened to the leads in a certain stage and month. For example, you can see that of the $1.6M that was in "prospect" stage in January:</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"></div><ul><li>$750k (47%) stayed in "prospect" stage</li><li>$500k (31%) were moved to the next stage ("demo/trial")</li><li>$350k (22%) were lost/purged</li></ul><div><br /></div><div>The next step was to add a few additional months to the mockup:</div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://3.bp.blogspot.com/-UJnsdS6VkkE/V28OMpE3v5I/AAAAAAAAAgM/I3dw_T9FmIsiCrxbbGeHqc81M5ZlZ8VnQCLcB/s1600/PipelineVizStep2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="233" src="https://3.bp.blogspot.com/-UJnsdS6VkkE/V28OMpE3v5I/AAAAAAAAAgM/I3dw_T9FmIsiCrxbbGeHqc81M5ZlZ8VnQCLcB/s400/PipelineVizStep2.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">This unfortunately made things a little messy, and people will probably feel overwhelmed by the amount of numbers. One solution, if someone decides to build a little application like a Salesforce.com add-on, could be to hide all of the pipe numbers by default and show them on-hover (maybe with an option to show them all at once):</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-HS-4HDjhbHo/V28P26bOBZI/AAAAAAAAAgY/Fsjq_1GuQuomqPssq3_tbgKZgwX_a7cUgCLcB/s1600/PipelineVizStep3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="243" src="https://1.bp.blogspot.com/-HS-4HDjhbHo/V28P26bOBZI/AAAAAAAAAgY/Fsjq_1GuQuomqPssq3_tbgKZgwX_a7cUgCLcB/s400/PipelineVizStep3.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">What's still missing are some aggregated key metrics ...</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-SlS-Z_SAU1o/V28Qpl9YSII/AAAAAAAAAgk/LJRCAT4NdF8Ad7B-2QT1L3AqWvqL8wirgCLcB/s1600/PipelineVizStep4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="195" src="https://1.bp.blogspot.com/-SlS-Z_SAU1o/V28Qpl9YSII/AAAAAAAAAgk/LJRCAT4NdF8Ad7B-2QT1L3AqWvqL8wirgCLcB/s400/PipelineVizStep4.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">... and a better way to quickly grasp how these numbers have changed month over month:</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://3.bp.blogspot.com/-A5KJApqXQME/V28ROLEI7HI/AAAAAAAAAgw/TagzD7jzfukLKz5dYmXR2iImwLoHmFIoACLcB/s1600/PipelineVizStep5.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="257" src="https://3.bp.blogspot.com/-A5KJApqXQME/V28ROLEI7HI/AAAAAAAAAgw/TagzD7jzfukLKz5dYmXR2iImwLoHmFIoACLcB/s400/PipelineVizStep5.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Here's one mockup with all three elements on it:</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://4.bp.blogspot.com/-JG-VgPCfYfY/V28SBW7Xc-I/AAAAAAAAAg8/dz48BNETaps-38lxxU1cLhFo8k967M-gQCLcB/s1600/PipelineVizStep6.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="640" src="https://4.bp.blogspot.com/-JG-VgPCfYfY/V28SBW7Xc-I/AAAAAAAAAg8/dz48BNETaps-38lxxU1cLhFo8k967M-gQCLcB/s640/PipelineVizStep6.png" width="376" /></a></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">What you can quickly see in this example is that this imaginary startup is adding an increasing dollar amount of prospects to the pipeline and keeps closing deals, but the rate at which it moves leads to the bottom of the funnel is declining. At the same time, the percentage of lost deals has been growing slowly, while the percentage of deals that remained in the same stage has increased sharply, indicating an increase in sales cycle and/or a poor job of pipeline purging. This has already led to a shrinking bottom-of-the-funnel pipeline, and if the company can't figure out and fix the cause of that development, it will soon close less and less deals.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">All of this is something that you can immediately see by looking at these charts and numbers and which I think is usually harder to see by looking at traditional pipeline charts. What do you think? Looking forward to your comments!</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div><br /></div><br /><div><br /></div><div><br /></div><div><br /></div><div><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div><br /><div></div></div></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-45432875777023259512016-06-03T00:43:00.000+02:002016-06-03T00:43:10.798+02:00SaaS Funding Napkin, the mobile-friendly editionMy <a href="https://2.bp.blogspot.com/-VCfpzLhSSxM/V0tbZAPvRTI/AAAAAAAAAeM/Y8RcMQS2H9cCSZLzNcU0gn9g5Aekn1pwACLcB/s1600/SaaSFunding2016On_a_napkin.png">"SaaS Funding Napkin"</a>, <a href="http://christophjanz.blogspot.com/2016/05/what-does-it-take-to-raise-capital-in.html">published a few days ago</a>, got lots of love on Facebook, Twitter, etc. Thanks everybody! Some people (rightfully) mentioned, though, that the image is hard to read on mobile devices. So if a napkin has a good format for a desktop or laptop screen, which real-world-analogy could be a fit for mobile screens?<br /><div><br /></div><div>You guessed right.<br /><br />Here you go (please scroll down or <a href="http://i.imgur.com/69x1DzT.jpg">click here</a>).<br /><br /><br /><img border="0" src="http://i.imgur.com/69x1DzT.jpg" width="100%" /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-63278099303612707692016-05-31T23:03:00.000+02:002016-06-09T22:31:56.086+02:00What does it take to raise capital, in SaaS, in 2016?When we invest in a SaaS startup, which almost always happens at the seed stage, the next big milestone on the company’s roadmap is usually a Series A. If you carry this thought further and assume that the biggest goal after the Series A is to get to the Series B (and so on, you get the idea) it sounds like <a href="https://en.wikipedia.org/wiki/Turtles_all_the_way_down">turtles all the way down</a>. But financing rounds are obviously not a goal in itself. They are a means to a bigger goal. Some SaaS companies got big without raising a lot of capital – Atlassian, Basecamp and Veeva are probably the most famous examples. But they are exceptions, not the rule. According to <a href="http://tomtunguz.com/saas-capital-raises-and-ipo">this analysis of Tomasz Tunguz</a>, the median SaaS company raises $88M before IPO.<br /><br />So what does it take to raise money for a SaaS company in 2016? With <a href="http://christophjanz.blogspot.com/2015/01/whats-table-stakes-in-saas-anno-2015.html">constantly rising table stakes</a> and a fundraising environment that looks quite a bit less favorable than last year’s, I believe the bar is higher than in the last 18-24 months (although raising money is still much easier than it was in <a href="https://www.zendesk.com/blog/happy-birthday-zendesk-3-years-and-beyond/">“Silicon Valley’s nuclear winter” in 2008</a>).<br /><br />Below is my back of a (slightly bigger) napkin answer to this question.<br /><br />A few important notes:<br /><br /><ul><li>The assumption of the information in the table is that the founding team is relatively “unproven”. Founding teams with previous large exits under their belts can raise large seed rounds at very high valuations on the back of their track records and a <del>Powerpoint</del> Keynote presentation.</li><li>Some of the information is tailored to enterprise-y SaaS companies. If you have a viral product (like <a href="http://www.typeform.com/">Typeform</a> or <a href="http://www.infogr.am/">infogram</a>), some of the “rules” don’t apply.</li><li>If you have virality <i>and</i> a proven founder team, you’re Slack and no rules whatsoever apply. :)</li></ul><br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><span style="margin-left: auto; margin-right: auto;"><a href="https://2.bp.blogspot.com/-VCfpzLhSSxM/V0tbZAPvRTI/AAAAAAAAAeM/Y8RcMQS2H9cCSZLzNcU0gn9g5Aekn1pwACLcB/s1600/SaaSFunding2016On_a_napkin.png" target="_blank"><span id="goog_1682128825"></span><img border="0" height="640" src="https://2.bp.blogspot.com/-VCfpzLhSSxM/V0tbZAPvRTI/AAAAAAAAAeM/Y8RcMQS2H9cCSZLzNcU0gn9g5Aekn1pwACLcB/s640/SaaSFunding2016On_a_napkin.png" width="593" /></a></span></td></tr><tr><td class="tr-caption" style="text-align: center;"><a href="https://2.bp.blogspot.com/-VCfpzLhSSxM/V0tbZAPvRTI/AAAAAAAAAeM/Y8RcMQS2H9cCSZLzNcU0gn9g5Aekn1pwACLcB/s1600/SaaSFunding2016On_a_napkin.png" target="_blank">(click here for a larger version)</a></td></tr></tbody></table><span id="goog_1682128826"></span><br />PS: Thanks to <a href="https://twitter.com/jasonlk">Jason M. Lemkin</a>,&nbsp;<a href="https://twitter.com/ttunguz">Tomasz Tunguz</a>, <a href="https://twitter.com/ncsh">Nicolas Wittenborn</a>&nbsp;and my colleagues at <a href="http://www.pointninecap.com/">Point Nine</a> for reviewing a draft of this post!<br /><br />[Update 1: Here's a <a href="http://christophjanz.blogspot.com/2016/06/saas-funding-napkin-mobile-friendly.html" target="_blank">mobile-friendly version</a> of the napkin.]<br /><br />[Update 2: And here is a <a href="https://docs.google.com/spreadsheets/d/1b2dMDQv40RUufdqDTz_t8DqvL4boQ9us55pJOtnDZro/edit" target="_blank">Google Sheet version</a> for better readability. :) ]<br /><br /><br /><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: left;"><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-6358137723030636862016-04-11T22:34:00.000+02:002016-04-11T22:34:48.281+02:00Introducing the French CloudscapeFor some reason we keep finding great early-stage SaaS startups in France, and it's not because of my command of the French language. In the last few years we've invested in four awesome SaaS companies from France: <a href="http://www.algolia.com/">Algolia</a>, <a href="https://frontapp.com/">Front</a>, <a href="http://www.mention.net/">Mention</a> and <a href="http://www.critizr.com/">Critizr</a>. We recently did #5, which hasn't been announced yet, and are in advanced talks with a potential #6. Besides our SaaS investments, we're also proud investors in <a href="http://www.starofservice.us/">StarOfService</a>, an online marketplace to hire a wide range of professionals. Something is clearly going on in France, and we like it.<br /><br />Our good connection to the French startup ecosystem was one of the reasons why we picked France as the first country for our "European SaaS Landscape" project. Another reason was that <a href="https://twitter.com/clemnt">Clément</a>&nbsp;not only speaks French, he IS French, and knows the market very well.<br /><br />Without further ado, here it is: an industry map of the most important SaaS startups founded in France.<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-yQt-TE-3G9E/VwwJztbjxsI/AAAAAAAAAd0/gAAFl8oQF20dbf0cvVofMYdlcrO9atROA/s1600/FrenchCloudscape.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="640" src="https://1.bp.blogspot.com/-yQt-TE-3G9E/VwwJztbjxsI/AAAAAAAAAd0/gAAFl8oQF20dbf0cvVofMYdlcrO9atROA/s640/FrenchCloudscape.png" width="576" /></a></div><br /><br />To learn more about our methodology and some of the insights we got while doing the research, <a href="https://medium.com/point-nine-news/french-cloudscape-200-cloud-software-companies-analyzed-and-mapped-2644994f431#.r1alkafve">check out Clément's post on Medium</a>. If you have any questions, comments or suggestions, give us a shout!<br /><br /><br /><br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-71940826389657102982016-04-06T10:54:00.000+02:002016-04-06T10:56:43.979+02:00Truffle pig reloaded – Point Nine is looking for an AssociateAbout three years ago, we were looking for an Associate to join Point Nine and put up <a href="http://unbouncepages.com/truffle-pig-2/">this landing page</a>:<br /><br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://unbouncepages.com/truffle-pig-2/"><img border="0" height="640" src="https://2.bp.blogspot.com/-TJezT2luKsQ/VwOT__xHjqI/AAAAAAAAAdk/FnMKW-jIk_gkPEgr4S_k3qJ9e6u_QS6FQ/s640/unbouncepages_com_truffle-pig-2_.png" width="514" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">We called the position "truffle pig", because just like a truffle pig is digging up the best truffles from the ground, we as an early-stage VC try to find the best startups among a large number of potential investments. I have to give full credit for the truffle pig analogy to <a href="http://www.eventures.vc/team/mathias-schilling/">Mathias Schilling</a> and <a href="http://www.eventures.vc/team/thomas-gieselmann/">Thomas Gieselmann</a> of e.ventures, by the way. "Truffle pigs" is what they (young VC Associates at that time) called themselves when they approached my co-founder and me back in 1997 after having stumbled on <a href="https://web.archive.org/web/19981202141311/http://acses.com/">this website</a>. Fast-forward almost 20 years and we still haven't found a better way to describe the role. :)</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">Anyway, our search three years ago led to two fantastic truffle pigs, <a href="https://twitter.com/DecodingVC">Rodrigo</a> and <a href="https://twitter.com/ockenrock">Mathias</a>, both of whom got promoted to Principals at Point Nine in the meantime. And today we're excited to kick-off the search for a new Associate. <a href="http://unbouncepages.com/pnctrufflepigreloaded/"><b>Here are all the details</b></a>.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">This is an incredible opportunity for a young, super-smart, super-driven person with outstanding analytical skills and a solid user interface. I'm pretty sure that it took me more than 10 years to get the expertise and network which you'll get during three years in this job.&nbsp;</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: left;">If you're interested, please take a look at our <a href="http://unbouncepages.com/pnctrufflepigreloaded/"><b>job ad</b></a>. If you know somebody who could be great fit, please pass on the link. Thanks!</div><div class="separator" style="clear: both; text-align: left;"><br /></div><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-32573320319443915972016-03-29T23:37:00.002+02:002016-06-30T23:31:24.167+02:00SaaS Financial Plan 2.0 - bug fixes Since I published&nbsp;<a href="http://christophjanz.blogspot.com/2016/03/saas-financial-plan-20.html">v2 of my SaaS Financial Plan</a> a few days ago, two alert readers have kindly pointed out two formula errors in the Excel sheet. Sorry about that.<br /><div><br /></div><div><a href="https://www.dropbox.com/s/1pbdqraz6tke84u/SaaSFinancialPlan2.0.xlsx?dl=0">Here's a corrected version</a>. The Excel sheet that was linked from the original post has been corrected as well.</div><div><br /></div><div>In case you've started to modify the template already and want to keep working with the previous version, here are the two bugs that you need to correct:</div><div><br /></div><div>1) Cell <b>U124</b> on the <b>Costs</b> tab, i.e. the costs for external recruiters in December 2016, contained:</div><div><br /></div><i>=(W87-U87)*$E$124+X96</i><br /><div><br /></div><div>The <i>+X96</i>&nbsp;part has been added accidentally and needs to be removed. So the correct version is:</div><div><br /></div><div><i>=(W87-U87)*$E$124</i></div><div><br /></div><div>2) <b>Row 55</b> on the <b>Revenues</b> tab, i.e. the CACs for the Pro plan, is completely wrong. It should be, for column I (with the other columns following analogously):</div><div><br /></div><i>=0,5*(Costs!J62+Costs!J96+Costs!J104+Costs!J112+Costs!J122)/I49</i><br /><div><i><br /></i></div><div>Once again, apologies for the inconvenience. If I or somebody else finds any other bugs, I will fix them ASAP and update the change log here.</div><div><br /></div><div>PS: Before you ask – yes, I'm aware that it's ironic that I have to post an on-premise software style bug patch to a <b><i>SaaS</i></b> financial planning template. Ironic in an Alanis Morissette kind of way, that is, because "ironic" actually means something completely different. Google it if you don't believe me.<br /><br />[Update &nbsp;06/30/2016: I've fixed two further small issues that were reported by two kind readers in the comments below.]</div><div><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-23276323727336791862016-03-23T21:11:00.000+01:002016-03-23T21:17:50.850+01:00SaaS Financial Plan 2.0<div class="separator" style="clear: both; text-align: center;"><a href="https://4.bp.blogspot.com/-wSKiOJxpkkw/VvL4Cami6oI/AAAAAAAAAdU/8r4K6wWNfFwUjS7pZwZvHR9vGx5INj2ew/s1600/EasterEgg.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="188" src="https://4.bp.blogspot.com/-wSKiOJxpkkw/VvL4Cami6oI/AAAAAAAAAdU/8r4K6wWNfFwUjS7pZwZvHR9vGx5INj2ew/s200/EasterEgg.png" width="200" /></a></div><a href="http://christophjanz.blogspot.de/2012/03/financial-planning-for-saas-startups.html">Almost exactly four years ago</a> I published a <a href="https://docs.google.com/spreadsheet/ccc?key=0AkJVUDhVuAHldElDMWtxbEQzcUdHZmhDVldZb053SWc">financial plan template</a> for SaaS startups based on a model that I had created for Zendesk a few years earlier. I received a lot of great feedback on the template and <a href="http://christophjanz.blogspot.de/2012/03/financial-planning-for-saas-startups.html">the original post</a> remains one of the most viewed posts on this blog up to this day.<br /><br />In the last few weeks I've finally found some time to create a "v2" of the template ... just in time for a little Easter gift to the SaaS community. ;-) I'd recommend that you read this post first since it includes some important notes, but if you prefer to check out the template right away <b><a href="https://www.dropbox.com/s/1pbdqraz6tke84u/SaaSFinancialPlan2.0.xlsx?dl=0">click here to download the Excel sheet</a></b>.<br /><br />The original v1 model was a very simple plan for early-stage SaaS startups with a low-touch sales model. As I wrote in the original post:<br /><br /><blockquote class="tr_bq">It's a simple plan for an early-stage SaaS startup with a low-touch sales model – a company which markets a SaaS solution via its website, offers a 30 day free trial, gets most of its trial users organically and through online marketing and converts them into paying customer with very little human interaction. Therefore the key drivers of my imaginary startup are organic growth rate, marketing budget and customer acquisition costs, conversion rate, ARPU and churn rate. If you have a SaaS startup with a higher-touch sales model where revenue growth is largely driven by sales headcount, the plan needs to be modified accordingly.</blockquote><br />The new version comes with a number of improvements:<br /><ul><li>Support for multiple pricing tiers</li><li>Support for annual contracts with annual pre-payments</li><li>Much more solid headcount planning</li><li>Better visibility into "MRR movements"</li><li>Better cash-flow planning</li><li>Charts galore :-)</li></ul><div><br />The downside of these improvements is that the spreadsheet has become significantly larger and more complex, but I tried my best to find the right balance. Also, the vast majority of the numbers in the sheet are calculated and the number of input cells is fairly limited.</div><div><br /></div><div>The spreadsheet should be pretty self-explanatory but <b>I've included a number of comments in the spreadsheet</b>. Make sure to check them out - some of them are important in order to understand the model (in case you're not familiar with that Excel feature, hover over the little red triangles).</div><div><br /></div><div>Here are a some additional notes:</div><div><br /></div><div><b>1) General comments</b></div><div><ul><li>The sheet is hot off the press and given the large amount of formulas I can't rule out that there are bugs. If you find one, please <a href="mailto:christoph@pointninecap.com">email me</a> at and I'll fix it ASAP.</li><li><span style="color: blue;">Blue</span> numbers indicate data-entry cells. Black and <span style="color: #999999;">grey</span> numbers are computed.</li><li>The model contains a lot of simplifications. Don't expect that it will perfectly fit your specific business - consider it a starting point.</li></ul><div><br /></div><div><b>2.) "Summary" tab</b></div><div><ul><li>The "Summary" tab contains only two types of input cells: Your starting bank balance and cash injections from financings. Everything else is calculated, mostly using data from subsequent tabs.</li><li>As with all input cells in the model, consider the values that I've put in to be dummy data. Fill those cells with your own data and assumptions.</li><li>The model doesn't take into account interest or taxes (except for payroll taxes).</li><li>The "Revenues" line shows your end-of-month MRR for the respective month. This is <i>not</i> compliant with the US GAAP definition of "revenues", which uses different revenue recognition rules, but since SaaS companies live and breathe MRR I think it's the right approach for a SaaS financial model.</li></ul><div><br /></div><div><b>3.) "Revenues" tab</b></div></div></div><div><ul><li>The model assumes that you have three pricing tiers. I've called them "Basic", "Pro" and "Enterprise". If you have more or fewer pricing plans you can of course adjust the model accordingly (with some effort). It is further assumed that all Basic and Pro customers are on monthly plans and that all Enterprise customers are on annual plans.</li><li>The model assumes that you're getting signups organically and via paid marketing and that you're converting a percentage of them into Basic customers and Pro customers. You can change the key assumptions such as your organic growth rate and your conversion rates in the grey area on the left.</li><li>The Enterprise customer segment follows a different logic, based on the assumption that Enterprise customer acquisition is sales-driven as opposed to the marketing-driven low-touch sales model for Basic and Pro customers. The key drivers in the Enterprise segment of the model are your revenue targets, sales team quotas and your assumptions for churn and upsells.</li><li>The spreadsheet shows the impact of e.g. Basic customers who upgrade to Pro and Pro customers who upgrade to Enterprise, but to keep things simple it doesn't support each and every possible movement between plans. For example, I didn't include the option for Basic customers to upgrade to Enterprise straight away or for Enterprise customers to downgrade. If this is a relevant factor in your business, you can of course accommodate for that by adding a few extra rows.</li><li>For Basic and Pro customers, the model allows you to project ARPA development using a given ARPA at the beginning of the planning period along with assumptions on monthly ARPA increases. For Enterprise customers, the model assumes pricing increases at the time of renewal but not during the term of the subscription. Depending on your specific pricing model you'll have to modify that, e.g. to allow for Enterprise customers to add more seats continuously.</li><li>In order to be able to calculate churn for Enterprise customers in the 1st year of the plan, it is assumed that existing Enterprise customers have been acquired over the course of the previous 12 months. This is of course a somewhat theoretical assumption and you need to adjust the model to include your actual numbers.</li><li>As you can see in one of the charts below the numbers, the model allows you to calculate your "MRR movements". It's worth pointing out that the model currently doesn't show "Expansion MRR" and "Contraction MRR" separately but only the delta of the two, which I've called "Net Expansion MRR". In order to calculate Expansion MRR and Contraction MRR separately I'd have to add a couple of additional rows. To avoid making things too complicated, I decided against doing that for now. Fortunately <a href="http://www.chartmogul.com/">ChartMogul</a> (a Point Nine portfolio company, sorry for the plug) makes it super easy to drill down into all of your MRR movements.</li><li>Please note that the CAC data and "CAC payback time" calculation are based on pretty crude simplifications. A solid planning of CAC payback times, CAC/LTV ratios etc. would require a lot of additional input data.</li><li>The rows with the "Thereof bonuses..." label contain matrix formulas. Handle with care. :)</li></ul><div><br /></div></div><div><b>4.) "Costs" tab</b></div><div><ul><li>In order to adjust headcount planning in the G&amp;A, R&amp;D and marketing departments, change the assumptions for start date, base salary and bonus in the grey "Assumptions" area. You can remove, change or add roles in column H.</li><li>With the exception of the VP of Sales role, sales staff headcount planning is done on the separate "Sales Team Hiring Plan" tab (re-using a model <a href="http://christophjanz.blogspot.de/2015/06/by-time-youre-at-2-3m-in-arr-you-need.html">that I've built for this post</a>). It calculates the number of sales people that you need based on the growth targets for your Enterprise customer segment, the quota of your sales people and a few other variables.</li><li>Headcount planning for the Customer Success team is (again with the exception of the VP) done formulaically as well, based on assumptions on how many customers a customer success team member can handle.</li><li>It is assumed that there's only one team, which I've called Customer Success, which does both customer support and customer success. Many SaaS companies have different teams for the two functions; if you're one of them you can adjust the plan accordingly.&nbsp;</li><li>The costs for the Customer Success team are attributed to CoGS. This is debatable – if your Customer Success team plays an important role in converting signups or upselling customers you should consider allocating at least a portion of these costs to S&amp;M and include those costs in your CACs. Please note that changing the "cost type" in <i>column I</i> will not automatically move the costs to a different category on the "Summary" tab so you'll have to do that manually.</li><li>The model assumes that payroll tax is the same for all employees. This may have to be adjusted, e.g. if you have people in different countries.</li><li>Regarding the cash impact of expenses, the model assumes that:</li><ul><li>payroll taxes are paid monthly</li><li>bonuses are paid yearly (except for the sales team)</li><li>sales team bonuses are paid quarterly (since bonuses/commissions play a much stronger role in sales compared to other departments)</li></ul><li>The model (somewhat simplistically) assumes that there are no capital expenditures. If you make investments into things like servers, computers or office furniture you should add these expenses accordingly.</li></ul><div><br /></div></div><div>If you've made it this far and haven't downloaded the Excel sheet yet: <b><a href="https://www.dropbox.com/s/1pbdqraz6tke84u/SaaSFinancialPlan2.0.xlsx?dl=0">Here it is</a></b>.</div><div><br /></div><div>If you have any questions, comments or suggestions, let me know in the comments or <a href="mailto:christoph@pointninecap.com">email me</a>.&nbsp;And if you like the model, <a href="http://ctt.ec/8Wb9Q">tweet it out</a>. :)</div><div><br /></div><div>Finally, big thanks to Chris Amani, Sr. Finance Director at <a href="https://www.humanity.com/">Humanity</a>, as well as to Pawel and Dominik of Point Nine, for reviewing drafts of the model and for providing valuable feedback.</div><div><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-16836954331922545152016-03-11T23:09:00.001+01:002016-03-11T23:09:17.981+01:00Building any business is hardJudging from the number of Facebook likes and retweets, as well as comments on Twitter and elsewhere,&nbsp;<a href="http://christophjanz.blogspot.de/2016/02/thats-nice-little-1-2m-saas-company-you.html">my last post</a> resonated with quite a lot of people. Some people thought it was provocative though, and some chimed in with good feedback:<br /><br /><blockquote class="twitter-tweet" data-lang="en"><div dir="ltr" lang="en"><a href="https://twitter.com/hunterwalk">@hunterwalk</a> building ANY business is hard</div>— Jonathan Abrams (@abrams) <a href="https://twitter.com/abrams/status/705956825569456129">March 5, 2016</a></blockquote><script async="" charset="utf-8" src="//platform.twitter.com/widgets.js"></script> <br />Therefore I thought it would be worth following up on the topic to make sure that my message is clear.<br /><br />The provocative sentence, I think, was this one:<br /><blockquote class="tr_bq">"Building a SaaS business with $1-2 million in ARR is not that hard and not that valuable."</blockquote><div>It's important to point out that I took it back in the next sentence ...</div><blockquote class="tr_bq">"Let me rephrase that. Starting a new company is always hard and most SaaS startups never get to $1-2 million in ARR. Every founder who accomplishes this deserves a huge amount of respect."</blockquote>... and tried to explain the real point I was trying to make in the next one:<br /><blockquote class="tr_bq">"The point is that getting to $1-2 million in ARR probably has less predictive value concerning a company’s ability to get to true scale than most people think – or at least thought some years ago."</blockquote><div>As you can see, I don't disagree at all with Jonathan Abrams' s comment that building any business is hard. The reason why I wrote the sentence above, only to rephrase it in the following sentence, was that it was a reference to <a href="https://pando.com/2014/03/22/thats-a-nice-little-40m-ecommerce-company-you-have-there-call-me-when-it-scales/">Josh Hannah's post about "nice little $40M eCommerce companies"</a>, which my post was inspired by.</div><div><br /></div><div>To be as clear as possible about the subject, let me sum up my view again:</div><div><br /></div><div>1) Building any business is hard. It requires a much broader skill set, more hard work and much more persistence than most normal jobs. (Let me refine that to "normal <i>office</i> jobs" - I don't want to get into an argument with heart surgeons or firefighters.) And since most businesses fail (at least when it comes to tech startups) it also requires a huge tolerance for risk.<br /><br />2) Getting a SaaS company from 0 to $1-2M in ARR is hard. For the reasons <a href="http://christophjanz.blogspot.de/2016/02/thats-nice-little-1-2m-saas-company-you.html">mentioned in the original post</a>, I think it has become significantly easier in the last 5-10 years but that doesn't mean that it isn't still very hard. Maybe a better way to put it would be "more likely" than "easier".<br /><br /></div><div>3) As hard as it is to get to $1-2M in ARR, getting to that level doesn't say much about a company's ability to get to $100M in ARR. For most companies which didn't raise venture capital this is completely irrelevant. If you're a bootstrapped company or raised only a small amount of outside funding and eventually get to a few million dollars in ARR that's an amazing outcome, and calling a company like this a "lifestyle business" is ignorant and stupid. If you're a VC-funded company, the prospects of getting to $100M matter, though – at least to some of your shareholders. :)<br /><br />In case it's still not clear, maybe this funnel diagram helps to explain what I mean. :-)<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://3.bp.blogspot.com/-oooa_qVSecE/VuNBY-tJ9lI/AAAAAAAAAdE/usDL5HYwgHMhN8U3tiJIt21Ybtr5W-hrw/s1600/Buildinganystartupishard_key.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="251" src="https://3.bp.blogspot.com/-oooa_qVSecE/VuNBY-tJ9lI/AAAAAAAAAdE/usDL5HYwgHMhN8U3tiJIt21Ybtr5W-hrw/s400/Buildinganystartupishard_key.png" width="400" /></a></div><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-29427140588176570842016-02-20T23:57:00.001+01:002016-03-11T23:10:55.062+01:00That’s a nice little $1-2M SaaS company you have here. Call me to discuss if it will scale!About two years ago, <a href="https://twitter.com/jdh">Josh Hannah</a> of Matrix Partners wrote an excellent article titled <a href="https://pando.com/2014/03/22/thats-a-nice-little-40m-ecommerce-company-you-have-there-call-me-when-it-scales/">“That's a nice little $40M eCommerce company you have there. Call me when it scales.”</a> In it he argues that an eCommerce business with $10 to $20 million in revenues is not that hard to build and also not very valuable. I would recommend that you read the full article, but one of the key points of the article was that if you fill a niche and have distinctive product/market fit with a set of customers, you can acquire customers very cheaply - up until a certain point, when you’ve maxed out the cheap customer acquisition channels and need to tap into more scalable channels. At that point it becomes a lot harder because the next set of customer acquisition channels will likely be much more expensive.<br /><br />As a side note I’d add that the value of an eCommerce business with $10-20 million in revenue can be even more deceptive if a company has burned a lot of money to get to this level and has very low (or even negative) gross margins. The reason is that in most categories online shopping has become ultra-transparent (something which <a href="https://partners.nytimes.com/library/tech/98/08/cyber/eurobytes/11euro.html">I’m not completely innocent of</a> ;-) ) and that there’s a group of highly price-sensitive customers which always goes for the lowest price. So if you start an online shop, offer products at a loss, get listed on some of the biggest comparison shopping sites and do some affiliate marketing, you can easily get to tens of millions in revenue.<br /><br />Now let’s talk about SaaS. In the last few years I’ve come to the realization that Josh’s observation can also be applied to the SaaS world: Building a SaaS business with $1-2 million in ARR is not that hard and not that valuable. Let me rephrase that. Starting a new company is always hard and most SaaS startups never get to $1-2 million in ARR. Every founder who accomplishes this deserves a huge amount of respect. The point is that getting to $1-2 million in ARR probably has less predictive value concerning a company’s ability to get to true scale than most people think – or at least thought some years ago.<br /><br />The reason, I think, is that over the last 5-10 years it has become much easier to build a SaaS product and get initial traction:<br /><br /><ul><li>Building a web application has become much easier, faster and cheaper. Whether starting an Internet startup has really become 10x cheaper depends on how exactly you phrase the question and <a href="https://news.ycombinator.com/item?id=2260984">is debatable</a>. But creating and launching a SaaS product has without a doubt become much cheaper in the last ten years. Moore’s Law, cheaper hardware and more bandwidth are one factor, but the even more important factor is that today there are great products for so many of the issues which the previous generation of SaaS founders had to worry about (<a href="https://www.zuora.com/">billing</a>, <a href="http://www.chartmogul.com/">analytics</a>, <a href="http://www.serverdensity.com/">server monitoring</a>, <a href="http://newrelic.com/">application performance</a>, <a href="http://www.zopim.com/">live chat</a>, to name just a few … even AWS didn’t exist 10 years ago!).</li><li>Ten years ago, there was nobody who SaaS founders could ask in order to learn how to do, for example, inbound marketing, low-touch sales or customer success. Many of the tactics that everybody is using today hadn’t been invented yet. In the last ten years the playbook has been written and subsequently published. As I wrote in my post about the <a href="http://christophjanz.blogspot.de/2015/01/whats-table-stakes-in-saas-anno-2015.html">rising table stakes in SaaS</a>, today an abundance of knowledge about any imaginable SaaS topic is readily available online and events like the fantastic <a href="http://saastrannual.com/">SaaStr conference</a> last week allow founders to learn from people who’ve done it before.</li><li>As SaaS is quickly becoming the norm, it’s now much easier to get initial traction. In any given category, the number of potential customers who considers (and in most cases prefers) a SaaS solution is much higher than it was some years ago. This and the fact that almost everybody owns a smartphone today has given rise to new categories which previously weren’t software categories at all because people used pen and paper to get the job done.</li></ul><br />So – it has become much easier to develop and launch a SaaS application and get initial traction, but if you have product/market fit in a small niche, which many SaaS companies do, it may be very hard to expand beyond that niche. And even if your market is large in principle, keeping growth up after you’ve picked the low-hanging fruits and reached a few million dollars in ARR will become increasingly difficult. In order to go from a $1-2 million in ARR to $10 million and eventually $100 million, you’ll have to find highly repeatable and reasonably profitable ways to acquire customers at huge scale. With few exceptions that means you either need to have a viral product (a.k.a. as <a href="http://christophjanz.blogspot.com/2014/10/five-ways-to-build-100-million-business.html">hunting mice</a>) or you have to <a href="http://christophjanz.blogspot.de/2014/11/when-deers-morph-into-elephants.html">go upmarket</a> and dramatically increase your ACV over time.<br /><br />Some SaaS businesses manage to do this and have a shot at building a $100 million ARR company, but for the majority of SaaS companies growth will taper off once they’ve reached a few million dollars in ARR, making it hard to ever grow significantly beyond $10-20 million. In a way, this isn’t surprising – not everyone can become a unicorn. :-) The non-trivial part of what I’m saying is that 5-10 years ago, many of these companies wouldn’t have gotten to a few million dollars in ARR. Put differently, there are more $100 million ARR SaaS companies today, but the number of companies in the $1-10 million ARR range has grown disproportionately faster. That’s my theory at least, it’s not scientifically proven.<br /><br />If my theory is true, will this be bad news for people in the SaaS industry? It’ll depend on who you ask. It could make seed and Series A investing harder because the percentage of seed and Series A funded SaaS startups that becomes really big would decrease - and VCs need large outcomes in order to make their business model work. But it would also lead to the generation of a large number of small-ish but still very viable SaaS businesses, many of which could generate very decent profits for their founders. From that point of view, there’s never been a better time to start a SaaS company.<br /><br />PS: You may have noticed that I’ve changed Josh’s “call me when it scales” to “call me to to discuss if it will scale”. Being a seed investor I’m trying to find SaaS companies that <i>can</i> scale before they <i>have</i> scaled.<br /><br />PPS: If you’re wondering why Josh talks about revenues in the $10-40 million range when he refers to sub-scale companies while I talk about $1-2 million in ARR: The reason is that besides the fact that SaaS revenues are recurring, SaaS margins are almost an order of magnitude higher than eCommerce margins. $1 in SaaS revenues is much more valuable than $1 in eCommerce revenues (<a href="http://abovethecrowd.com/2011/05/24/all-revenue-is-not-created-equal-the-keys-to-the-10x-revenue-club/">all revenue is not created equal</a>!).<br /><br />[Update 03/11/2016: I wrote <a href="http://christophjanz.blogspot.de/2016/03/building-any-business-is-hard.html">a followup post</a> to the post above.]<br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-29986628851620170832015-12-12T21:40:00.000+01:002015-12-12T21:40:31.921+01:00A simple tool to improve your 2016 planning<div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-LjiMDAlT9ts/VmyFjmoUnEI/AAAAAAAAAc0/n4tYvJEUEcM/s1600/M_M_Growth_Calculator_-_Google_Sheets.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="286" src="http://4.bp.blogspot.com/-LjiMDAlT9ts/VmyFjmoUnEI/AAAAAAAAAc0/n4tYvJEUEcM/s400/M_M_Growth_Calculator_-_Google_Sheets.png" width="400" /></a></div><br /><br />In my last post I wrote about <a href="http://christophjanz.blogspot.de/2015/11/the-problem-with-month-over-month.html">the problem with month-over-month growth rates</a>. One of the issues I talked about was that when your revenue plan numbers are based on a constant m/m percentage growth figure (i.e. you're projecting to grow exponentially), your short-term objectives are likely too low relative to your longer-term goals.<br /><br />As an example, I showed a (fictional) SaaS startup that wants to grow from $1,000 in MRR to ~ $85,000 in MRR within one year. If that company projects exponential growth, it will have to add less than $7,000 in net new MRR in the first half of the year in order to be on track ... but to stay on track, it needs to add more than 10x that amount in the second half of the year!<br /><br />To follow-up on the topic, I've put together a very simple (Google Sheets based) calculator which startup founders might find useful when they work on their plan for 2016. The purpose of this simple sheet is <u>not</u> to replace a thorough bottom-up planning which is based on the key drivers of your business. Instead, the idea is that it might be a useful input or cross-check for a more detailed plan.<br /><br /><b><a href="https://docs.google.com/spreadsheets/d/1srIbJZ0QyVDRYMW8D2KqWXDWgcEucCbyIJHvSeFdN5M/edit?usp=sharing">Click here to check out the tool.</a></b><br /><br />Here's what it does:<br /><br /><ul><li>You enter your start MRR in the orange field at the top left</li><li>You enter your target growth for the year in the orange field in the middle</li><li>The sheet will then calculate three alternative paths to your target MRR for the end of the year</li></ul><div><br />The first one is based on linear growth. It just takes the total net new MRR that you want to add throughout the year and assumes that you're adding 1/12th of it each month.</div><div><br /></div><div>The second one is based on an exponential growth assumption, i.e. it assumes that you're growing at a constant percentage growth rate every month.</div><div><br /></div><div>The third alternative, which I've called "Happy Medium", has a growth curve that sits between the linear and the exponential option. You can see that well if you take a look at the charts below the numbers.<br /><br />I think most early-stage startups should project a trajectory which, like the "Happy Medium" path", is somewhere between the linear and the exponential option. What do you think?<br /><br /><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-79808947261070856982015-11-30T12:04:00.003+01:002015-12-16T14:07:13.452+01:00The problem with month-over-month growth ratesMost fundraising decks contain a slide with a chart that looks roughly like this:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-rmxnewyibHA/VlxhSfxKpEI/AAAAAAAAAbg/KupiWGBqFkE/s1600/pasted%2Bimage%2B1.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://2.bp.blogspot.com/-rmxnewyibHA/VlxhSfxKpEI/AAAAAAAAAbg/KupiWGBqFkE/s320/pasted%2Bimage%2B1.png" width="310" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Chart #1</td></tr></tbody></table><br />Or this:<br /><div><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-m5A3cvD24hw/VlxhwNrZYqI/AAAAAAAAAbo/GJXqvoau-ZY/s1600/pasted%2Bimage%2B2.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://2.bp.blogspot.com/-m5A3cvD24hw/VlxhwNrZYqI/AAAAAAAAAbo/GJXqvoau-ZY/s320/pasted%2Bimage%2B2.png" width="310" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Chart #2</td></tr></tbody></table><br /><br />I’ve also seen charts that look like this:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-_Q3h1dmrTxA/Vlxh1WQDn2I/AAAAAAAAAbw/1TIWyLKtDn0/s1600/pasted%2Bimage%2B3.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://1.bp.blogspot.com/-_Q3h1dmrTxA/Vlxh1WQDn2I/AAAAAAAAAbw/1TIWyLKtDn0/s320/pasted%2Bimage%2B3.png" width="310" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Chart #3</td></tr></tbody></table><br />Or this:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-J2UMvxLs3Dc/Vlxh9eoA10I/AAAAAAAAAb4/2phLP83qjto/s1600/pasted%2Bimage%2B4.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://2.bp.blogspot.com/-J2UMvxLs3Dc/Vlxh9eoA10I/AAAAAAAAAb4/2phLP83qjto/s320/pasted%2Bimage%2B4.png" width="310" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Chart #4</td></tr></tbody></table><br />Chart #3 and #4 are good for a LOL (or a “WTF!”, depending on your sense of humour), and fortunately we’re not getting too many of these (if you don’t know what I’m talking about, take another look at the charts). A chart that looks similar to #1 or #2 is something we look at on a daily basis, though.<br /><br />What all of these charts and their headlines have in common is that they’re trying to convey exponential growth. Since traction is the #1 factor that determines fundraising success, it’s understandable that founders try hard to show exponential growth (which talking about a m/m growth rate implies). This is especially true if you’re one out of 50 startups that present at a “demo day” and you have three minutes to get investors excited. At some of the demo days that I’ve attended, I felt like this led to an arm’s race for the highest growth rates and sometimes made me feel like this:<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-s2EXXV3BXHs/VlxiJfFZxXI/AAAAAAAAAcA/Mmg-OvQI7ms/s1600/pasted%2Bimage%2B5.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="300" src="http://1.bp.blogspot.com/-s2EXXV3BXHs/VlxiJfFZxXI/AAAAAAAAAcA/Mmg-OvQI7ms/s400/pasted%2Bimage%2B5.png" width="400" /></a></div><br /><br />Let’s look at the numbers behind chart #1 and #2.<br /><br />Chart 1:<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-0zcZChQ-3yA/VlxiNoI6reI/AAAAAAAAAcI/xg2s69qz2dI/s1600/pasted%2Bimage%2B6.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="63" src="http://3.bp.blogspot.com/-0zcZChQ-3yA/VlxiNoI6reI/AAAAAAAAAcI/xg2s69qz2dI/s640/pasted%2Bimage%2B6.png" width="640" /></a></div><br />As you can see, chart #1 shows very strong signs of exponential growth: this (fictional) company’s MRR is growing at a relatively steady rate of 18-21% per month, and the amount of net new MRR which the company is adding is growing every month. Mathematically this looks clearly exponential, and yet, since the absolute numbers are still so low, unless you understand the drivers behind the growth you don’t know if there’s real, sustainable exponential growth (e.g. due to product virality) or if it’s just a series of step changes which makes the numbers look like exponential growth.<br /><br />If this sounds like an academic question to you, think about its impact on the company’s growth projections. If there’s true exponential growth at a rate of around 20% per month, the company’s numbers will quickly go through the roof. If, on the other hand, the growth isn’t driven by inherently exponential drivers, you should expect the growth rate to decline quickly, leading to much lower projections.<br /><br />Now let’s turn to the data behind chart #2:<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-lug_iXee0BM/VlxiTKrT4BI/AAAAAAAAAcQ/CSfInEs8en8/s1600/pasted%2Bimage%2B7.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="64" src="http://3.bp.blogspot.com/-lug_iXee0BM/VlxiTKrT4BI/AAAAAAAAAcQ/CSfInEs8en8/s640/pasted%2Bimage%2B7.png" width="640" /></a></div><br />If you take a closer look at the numbers, you can see that in contrast to chart #1, in spite of the chart’s headline and trendline, it doesn’t look like something’s growing exponentially here. The monthly growth rate is higher than 10% in all but two months, but it’s fluctuating heavily and the amount of net new MRR is going up and down. You can calculate a growth rate of 40% per month on average or a compound monthly growth rate (CMGR) of 35% without having to lie, and you can have Excel draw a trendline using an exponential regression. But I believe this is highly misleading. A more reasonable way of describing this company’s revenue growth would be to say that the company has been adding between $300 and $700 in net new MRR per month in the last ~ 12 months.<br /><br />Again, all of this may sound somewhat academic, but I think it has practical relevance in two ways: The first one is about how you communicate your numbers to potential investors when you’re fundraising. The second one is about how you’re projecting growth and what targets you’re setting for your team. Let’s take a closer look at both of them.<br /><br />1) When you’re talking to investors you of course want to show your numbers in the best possible light, and to say that you’re increasing revenue by $300-700 per month (to use the example from above) may not sound as exciting as a CMGR of 35%. However, keep in mind that experienced investors have very fine-tuned BS antennas, and if an investor gets the impression that you’re getting too creative in your interpretation of your data, that’s a huge turn-off. Therefore I’d recommend the following:<br /><br /><ul><li>If your numbers look similar to chart #2 from above, don’t try to read exponential growth into the chart.</li><li>If your numbers look more like chart #1, i.e. your monthly percentage growth is pretty stable and your monthly $ growth (or user growth, if you’re a consumer startup and pre-monetization) is going up consistently, it’s fair to talk about exponential growth. That said, as long as you’re at a very low absolute levels (say below ~ $20k in MRR if you’re a SaaS startup) it doesn’t make too much sense to talk about percentage growth rates, and talking about growth in terms of net new MRR per month may be more useful.</li><li>When you’ve reached what Jason M. Lemkin calls “Initial Traction” – around $1-2M in ARR – consider talking about y/y growth instead of m/m growth. There’s no strong rationale for that, but I think if you’re talking about longer periods of time, y/y growth is more intuitive to understand.</li></ul><br />2) As far as your internal goal-setting goes, the problem with an exponential growth assumption is that for early-stage startups it makes short-term goals too easy and longer-term goals too hard (unless you’re one of the 0.0...1% of startups that have a viral growth engine with a viral coefficient greater than 1).<br /><br />Let’s say you’re starting (almost) from zero and your goal is to be at roughly $80k in MRR in 12 months. If you’re assuming a constant m/m growth rate it looks like this:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-aefS_-bLj8c/VlxiafbSycI/AAAAAAAAAcY/Zkx6WojPWPw/s1600/pasted%2Bimage%2B8.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="307" src="http://3.bp.blogspot.com/-aefS_-bLj8c/VlxiafbSycI/AAAAAAAAAcY/Zkx6WojPWPw/s400/pasted%2Bimage%2B8.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Plan #1</td></tr></tbody></table><br />The blue line shows the total MRR at the end of the month; the orange bars show the net new MRR added in each month; and the red line shows your monthly growth rate in %. As you can see, you have to add pretty tiny amounts of net new MRR per month until around month 6 in order to reach your goals. Then it goes up quickly, and in the last two months of the year you’ll have to add $20-30k per month. The problem with a plan like this is that if you’re at $8000 after month 6 you think you’re on track, but actually you’ve only achieved 1/10th of what you have to achieve in the year.<br /><br />You can of course expect that you’re getting better throughout the year as your product matures and as you’re doing more sales and marketing, but I think the slope of plan #1 is too steep. A more helpful and more realistic plan would look like this:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-Ntmr7r1PRZ8/VlxigBenM0I/AAAAAAAAAcg/AtoiDRP8X2M/s1600/pasted%2Bimage%2B9.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="307" src="http://3.bp.blogspot.com/-Ntmr7r1PRZ8/VlxigBenM0I/AAAAAAAAAcg/AtoiDRP8X2M/s400/pasted%2Bimage%2B9.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Plan #2</td></tr></tbody></table><br />In this version you reach the same result after 12 months, but how you’re getting there is different. In contrast to plan #1, plan #2 doesn’t assume a constant m/m percentage growth rate. It assumes that the amount of net new MRR that you’re adding per month is growing, but on a linear basis. That may make the chart look less exciting, but I believe plan #2 is much more useful. If you use plan #2 and you’re on track after 6 months, it’s much more likely that you will still be on track after month 12.<br /><br />To sum up, my recommendations for modeling growth:<br /><br /><ul><li>In the first 12-24 months or so after launch, plan to get to your target number by assuming a curve similar to the one shown in plan #2.</li><li>After that, start using a m/m or y/y percentage growth target (ideally roughly in line with the <a href="http://christophjanz.blogspot.de/2015/03/how-fast-is-fast-enough.html">T2D3 concept</a>)</li></ul><br />As you may have noticed, my recommendations for how you should manage your targets internally are very much aligned with my recommendations for how you should communicate your numbers to investors. Isn’t that nice? :)<br /><br /><i>[Update 12/12/2015: As a followup to this post, I created <a href="http://christophjanz.blogspot.de/2015/12/a-simple-tool-to-improve-your-2016.html">a simple (Google Sheets based) calculator</a> which you might find helpful for your planning.]</i><br /><br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-87228397396514227232015-10-23T22:15:00.003+02:002015-10-23T22:29:18.195+02:00What sucks about fundraising Last week I wrote a post titled <a href="http://christophjanz.blogspot.de/2015/10/what-makes-fundraising-so-stressful.html">“What makes fundraising so stressful?”</a> and asked founders to <a href="https://pointninecap.typeform.com/to/RgRN1R">tell me which parts of the fundraising process suck</a>. As of this writing, about 110 founders have completed the Typeform survey. The results are very interesting, and in some cases shocking. More on that below, but let’s start with the responses to the first question:<br /><br /><script id="infogram_0_fundraising___1st_rating_question" src="//e.infogr.am/js/embed.js?OkT" type="text/javascript"></script> <br /><br /><h2><b><br /></b></h2><h2><b>“Your optionality is an illusion”</b></h2><br />More than 60 founders took the time to answer the additional free-form question (“What else has stressed you out?”). In their comments, many people emphasized and provided additional detail on some of the topics shown above, but several founders also pointed out additional issues. Reading through all of the comments has been very enlightening (and in a few cases humbling). Here’s a small selection of the answers:<br /><blockquote class="tr_bq">"The big egos"</blockquote><blockquote class="tr_bq">"Everything takes 4x more time than initially thought"</blockquote><blockquote class="tr_bq">"Associates who constantly want calls without involving a partner who can actually get the deal done (or not)."&nbsp;</blockquote><blockquote class="tr_bq">“It's venture capital but I have the feeling no VC will take risks. There is always a reason not to invest.”</blockquote><blockquote class="tr_bq">"Rejection from seed investors saying 'come back once you have X' (where X is in essence enough to raise Series A)."&nbsp;</blockquote><blockquote class="tr_bq">"Some investors haven't mentioned at all that they invested in similar company. I found that after the meeting."</blockquote><blockquote class="tr_bq">"Startup/investor fit. Finding people who understand the business and can support / advise us going forward, vs. wasting time talking to people who don't understand the venture potential of the business."&nbsp;</blockquote><blockquote class="tr_bq">"Investors using their lawyers as bad cops."</blockquote><blockquote class="tr_bq">"Radio silence and/or stringing me along, in service of ‘maintaining optionality’. Hint: if you do this, I won't come back to you next time I'm raising. Your optionality is an illusion." </blockquote><br /><h2>"Had an investor back out after a long negotiation that culminated in a SIGNED term sheet. This is outright destructive, and all but killed the company."</h2><br />The next question was “Which of the following things have happened to you already?”. Here are the results:<br /><br /><script id="infogram_0_fundraising___2nd_rating_question" src="//e.infogr.am/js/embed.js?BrP" type="text/javascript"></script> <br /><br /><br />The final question was: “Anything else you want to point out? Any other input on what VCs can do to make fundraising less stressful for founders?”. More than 45 people answered this question. The comments included:<br /><br /><blockquote class="tr_bq">"If you are not interested, say it right away (I had some of the best meetings with VCs that said it out early in the conversation)."</blockquote><blockquote class="tr_bq">"Don't waste our time or yours. Be very upfront about interest or not. Give succinct feedback, and don't sugar-coat why you're reacting the way you are."&nbsp;</blockquote><blockquote class="tr_bq">"Had an investor back out after a long negotiation that culminated in a SIGNED (but obviously non-binding) term sheet. This is outright destructive, and all but killed the company. Never, ever, ever do this to a young company. I literally hate this firm now. They are the worst!"&nbsp;</blockquote><blockquote class="tr_bq">"If you're transparent, direct, clear and fair, I will respect you and come back to you in the future. If you're weaselly, arrogant, or try to manipulate me, I won't."</blockquote><br /><h2>What are the take-aways?</h2><h3><b><br /></b></h3><h3><b>1) Founders understand that fundraising takes time and they can deal with rejections. But they hate being left in the dark.</b></h3><br />The top issues, that is the issues which founders said suck the most, are:<br /><br /><ul><li>"Not knowing where I am in the process, i.e. no ‘yes’ but also no clear ‘no’"</li><li>"Not understanding why VCs have passed"</li><li>"Having to answer dumb questions by VCs who didn’t understand our business"</li></ul><br />Interestingly these issues are precisely the ones that could be avoided if VCs did a better job. In contrast, things that cost time and energy but are a natural part of the fundraising process – creating a deck, preparing numbers, having many meetings, getting rejections – suck significantly less.<br /><br />This theme – founders can deal with rejections, but they need clarity – is also what has been mentioned the most in the free-form questions and is the clearest take-away of the survey.<br /><br />To my fellow VCs’ defense, if you get 300 or more inbound requests per month it’s very hard to give each founder a timely response, so unless an investor intentionally strings founders along in order to keep optionality (or the illusion thereof) I don’t want to blame him or her. But knowing that this is the #1 issue which stresses founders in the fundraising process, VCs should try very hard to become as responsive and transparent as possible. For us at Point Nine, these results served as a good reminder that we have to further improve our internal processes to make sure that each and every entrepreneur gets a swift answer from us.<br /><br /><h3><b>2) Fundraising sucks across all stages</b></h3><br />We also asked founders to tell us what stage they’re in. 59% said that the last round they’ve raised (or tried to raise) was a seed round. 30% said Series A, 11% said Series B.<br /><br />The only question which showed a statistically significant correlation with the stage was the question about “Getting initial meetings”. For earlier-stage founders, getting initial meetings has been significantly harder than for later-stage founders. That doesn’t come as a surprise, and maybe it shows that there’s at least one thing which VCs are good at: Getting their portfolio founders meetings with other VCs. :-)<br /><br /><h3><b>3) Backing out after a term sheet has been signed is much more common than we thought</b></h3><br />In the world of private equity and M&amp;A, signing a term sheet may have a different meaning but I’ve always thought that if a VC signs a term sheet it means they are fully committed to making the investment. And they ought to be. The purpose of the final due diligence that takes place after a term sheet is signed is to rule out “skeletons in the closet”. By the time you sign a term sheet, you should have made up your mind and should be done with your “commercial due diligence”.<br /><br />Apparently that’s not the case. 14 people, a shocking 14% of the respondents, said they’ve already experienced an investor backing out after a term sheet has been signed. Unless these 14 founders had skeletons in their closets, that’s 14 too many. As one founder said in the comments, if this happens it can kill a company.<br /><br />Based on these findings, founders are well advised to do more due diligence on their part before they sign a term sheet with a VC. One of the things you should do is ask the VC what kind of due diligence they’re still planning to do after the term sheet is signed.<br /><br />Huge thanks to all founders who took the time to participate in the survey! If you want to dive in even deeper into the survey results, please <a href="mailto:christoph@pointninecap.com">drop me a line</a><span id="goog_919769565"></span><span id="goog_919769566"></span><a href="https://www.blogger.com/"></a> and I’ll send you the Excel sheet with the complete data set.<br /><br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-50766822157641445042015-10-13T18:12:00.000+02:002015-10-13T21:22:15.653+02:00What makes fundraising so stressful?In theory, raising venture capital could roughly look like this:<br /><ol><li>You create an investor deck and send it to 5-10 VCs that you like (1 week)</li><li>You meet the ones that are interested and quickly figure out the 3-4 that are really bullish (1-2 weeks)</li><li>You have a few more meetings with those 3-4 VCs and answer their questions (2 weeks)</li><li>You negotiate with 2-3 of them and sign a term sheet with your favorite one (a few days)</li><li>You hand it over to your lawyer for the final due diligence and the legal paperwork (3-4 weeks)</li></ol><div>So ideally it's a couple of trips to Sand Hill Road (or San Francisco or London or <a href="http://www.pointninecap.com/contact/">Jaegerstrasse</a>) over a period of 4-6 weeks to get a term sheet, and after another 3-4 weeks you've got the money in your bank account.<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-ZVw3YwD7h-A/Vh0s3D2RG_I/AAAAAAAAAa4/G4I3iE8bGNM/s1600/sh9to.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="255" src="http://3.bp.blogspot.com/-ZVw3YwD7h-A/Vh0s3D2RG_I/AAAAAAAAAa4/G4I3iE8bGNM/s320/sh9to.jpg" width="320" /></a></div>In practice, things rarely go so smooth. More often than not, raising venture capital is a huge distraction for the founding team. Even if things go reasonably well, it usually means that one of the founders spends half of his time talking to VCs for several weeks – time that he or she can't spend on building the business. If things go less well, it's not only a huge time sink but can also be an extremely stressful experience.<br /><br /><b>Why is that, and does it have to be this way?&nbsp;</b><br /><br />To some extent, it's in the nature of things that convincing other people to give you a lot of money (and to commit to supporting you for the next 10 years) for a small stake in your risky early-stage startup is not an easy feat. The vast majority of startups fail, VCs can invest in only 1% or less of the startups they see, fundraising involves a lot of relationship-building, it's a complex process – that's all pretty obvious so I won't elaborate on that.<br /><br />But the question is if fundraising really has to suck as much as I think many or most founders experience it, and what investors can do to make it suck less. (I've already written about what founders can do on their end, e.g. by&nbsp;<a href="http://christophjanz.blogspot.de/2015/04/key-revenue-metrics-for-saas-companies.html">having clarity about their numbers</a>&nbsp;and by&nbsp;<a href="http://christophjanz.blogspot.de/2015/05/6-things-to-pre-empt-90-of-due-diligence.html">pre-empting most DD questions</a>.)<br /><br />To shed some light on that question I put together a short Typeform survey. If you are a founder or CEO and have raised venture capital it would be awesome if you could participate in the survey. It's anonymous and takes only a few minutes to complete (and thanks to <a href="http://www.typeform.com/">Typeform</a>, you can do it on your iPhone :) ). I will share the results in another post shortly.<br /><br /><a class="typeform-share button" data-mode="1" href="https://pointninecap.typeform.com/to/RgRN1R" target="_blank">Open the survey!</a><script>(function(){var qs,js,q,s,d=document,gi=d.getElementById,ce=d.createElement,gt=d.getElementsByTagName,id='typef_orm',b='https://s3-eu-west-1.amazonaws.com/share.typeform.com/';if(!gi.call(d,id)){js=ce.call(d,'script');js.id=id;js.src=b+'share.js';q=gt.call(d,'script')[0];q.parentNode.insertBefore(js,q)}id=id+'_';if(!gi.call(d,id)){qs=ce.call(d,'link');qs.rel='stylesheet';qs.id=id;qs.href=b+'share-button.css';s=gt.call(d,'head')[0];s.appendChild(qs,s)}})()</script> <br /><br /><br />Thanks in advance!<br /><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-11469747816990353162015-10-08T15:56:00.000+02:002015-10-08T15:56:41.909+02:00The importance of doing reference checks (2/2)<i>This is part two of Jenny's article about the importance of reference checks. <a href="http://christophjanz.blogspot.de/2015/10/the-importance-of-doing-reference-checks.html">If you haven't read the first part yet, start here</a>.</i><br /><br />Last time we spoke about WHY you should do reference checks and what impact a bad hire can have on your organization. In this second part I’d like to share my personal experience as well as some outcomes that have recently been discussed within the Point Nine family around the HOW. <br /><b><br /></b><b>General thoughts on the HOW:</b><br /><br /><ol><li>If you do reference checks, make sure they are one of the last steps of your recruitment process. Because if you do them right (I’ll explain further what that means) it will cost you time. You want to make sure that time is invested in the right candidate.</li><li>The number of reference checks people do varies greatly between 1 to 15 checks per person. You want to find inconsistencies within the feedback you receive about the person. Depending on how senior the candidate is, ask for more references. A good start is 2 references for junior/entry roles that you want to increase to 3 to 5 references for middle management positions and 6 to 10 references for a senior leadership position.</li><li>Make sure you have a mix of suggested references by the candidate as well some that you happen to know or you proactively approach to give you feedback. A good way to start is with the suggested ones. You can ask those guys who else they find you should talk to. Make sure you still top that up with your own research e.g. via LinkedIn or your personal network.</li></ol><br /><b>Now how to do them well?!</b><br /><br /><ul><li>Have questions prepared. Make sure you know what to ask rather just go for the “So, tell me something about John” kind of question. Ask specific questions about the candidate. Remember, you want to find inconsistencies! Don’t be okay with foggy answers, worst case rephrase the question.</li><li>Try to establish a relationship with the reference you are talking to. Do a video call if possible and try to avoid written references. Take your 2-5 minutes small talk time at the beginning. Why? It’s much harder to lie into your face when I like you :)</li><li>Don’t only ask direct peers. It’s much more interesting to talk to people e.g. that got fired by that person (they are usually much more honest and open) or in general someone that has worked below him and got directly impacted by that person. A good mix of people above, around and below works quite well!</li><li>Obviously try to avoid asking someone at the current company the person works unless he got recommended by the candidate.</li><li>A good way to challenge the integrity upfront is to ask the following question once you’ve received the suggested references: “Would you mind If I talk to Peter, Fran and George as well”? Watch the reaction closely!</li><li>Always remember: You hire someone for his strengths not lack of weaknesses so tailor your questions about the strengths you are looking for and make sure that you weigh the feedback you receive according to what you really need. Example: Reference says: “Steve, in his role as Head of Sales, was too pushy in his general approach and sometimes went too fast for the Executive Team and the organization, so it was really hard to follow”. This is generally not the best feedback, but if your company is currently trying to attack a market, someone like Steve might be just the right fit for this period of time ;)</li></ul><br />Here are some random questions that might be helpful for your day to day reference check. I usually use a mix of those and tailored ones to the specific candidate and role. Remember we’re trying to find inconsistencies, so use a good mix of questions for every reference check.<br /><br /><b>Some general questions that I find helpful:</b><br /><br /><ul><li>What is your relationship with Peter like?</li><li>What was it like to work with Peter?</li><li>What was Peter’s management style like?</li><li>Can you describe a tough/very challenging moment Peter was in and how he has managed to get ouf it?</li><li>If you think about the time you and Peter have worked together, what’s the first memory that pops up your mind?</li><li>Would you say Peter is more a team player or does he excel more when he’s on his own? Can you give a specific example for it?</li><li>Would you describe Peter as a hands on person?</li><li>Do you regret that Peter has left your company? Why?</li><li>Should I hire Peter? Why?</li></ul><br />There is plenty of reading out there with good stuff on that topic. One post that I can highly recommend is Mark Suster’s post <a href="http://www.bothsidesofthetable.com/2014/04/06/how-to-make-better-reference-calls/">“How to make better reference calls”</a>.<br /><br /><i>What are your thoughts? What are your favorite questions that you use in reference calls to cut through the <strike>bullshit</strike> politeness?</i><br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-82121379393818308682015-10-06T22:26:00.001+02:002015-10-08T15:58:04.669+02:00The importance of doing reference checks (1(2)<i>This is a guest post by Jenny Buch, <a href="http://christophjanz.blogspot.de/2015/09/introducing-jenny-buch-talent-manager.html">who recently joined us as a Talent Manager.</a> It's the first in a series of two posts. The second one will appear here soon.&nbsp;</i><br /><br />To follow up on the recently posted <a href="http://www.independent.co.uk/news/business/news/netflix-ceo-reed-hastings-says-companies-underestimate-importance-of-reference-checks-when-hiring-10515326.html">interview with Netflix CEO Reed Hastings</a>, I’d love to share my experience about reference checks with you.<br /><div><br />So, many of you probably made the experience of hiring someone that you would have stated as “a really promising candidate” upfront. But after four months into the job it turns out that the hire was actually a total fail, that your staff is thinking you’re an idiot for bringing him on board (even if they don’t tell you) and that you now have to pay the debts by firing that person and start a whole new time consuming hiring process again to reduce the mess you’ve just done to your organization.<br /><br />Well, even though things like these sometimes just happen and can have many reasons, there are ways to dramatically reduce the likelihood. One of them is to have a strong hiring process in place with its most important asset, you can guess it – reference checks!<br /><br /><div style="text-align: center;"><b>Or, to say it with Christoph’s words <a href="http://christophjanz.blogspot.de/2015/03/in-god-we-trust-all-others-bring.html">“In God we trust, all others bring references”</a></b></div><br /><a href="http://3.bp.blogspot.com/-3WGbQ7pb23o/VhQtpfg_SvI/AAAAAAAAAao/aKu1Weny7PM/s1600/The_Importance_of_doing_reference_checks_-_Google_Docs.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em; text-align: center;"><img border="0" height="320" src="http://3.bp.blogspot.com/-3WGbQ7pb23o/VhQtpfg_SvI/AAAAAAAAAao/aKu1Weny7PM/s320/The_Importance_of_doing_reference_checks_-_Google_Docs.png" width="216" /></a>Reference checks have been quite common in the US and most of the English speaking countries ever since but are still fairly new to many of the European countries. This is due to cultural differences and different common practice that was established in each country years ago. So why changing that good old practice and do references checks? Here is why:<br /><br />There is only so much you can get out of a certificate, a CV or an interview. Your goal is to get to know your new “promising candidate” as best as you can within a short period of time to make sure you don’t mess things up! Today, and especially in the startup scene, there’s a different need for different skills than there was when “written references” were the way you did it. Here are some classics of the “must have skills” for any kind of candidate that can only really be proved by a good reference check:<br /><br /><ul><li><u>Interpersonal skills:</u> Interpersonal skills for any kind of role matter much more these days than they did in the past (or to state it correct: people are more aware of them, they’ve always mattered). The interview situation is not the best way to find out whether or not your candidate is actually a great fit since some candidates are extremely good at selling themselves during an interview.</li><li><u>Integrity:</u> Today, an intern can become the CFO. Maybe the company sucks and he only became CFO because he went to the same university as one of the founders. As Ben Horowitz likes to say in his amazing book “The Hard Thing about Hard Things”. “There are two kinds of companies in this world. One where matters what you do and one where matters who you are. You can either be the first one or suck.” You want to make sure that his previous company was out of the first category and that besides his great university connections, he actually was the best candidate for the role and that’s why he got it - because he knows shit, works hard and is an awesome guy. I’m not saying that hiring from your university environment is bad, but it shouldn’t be the only reason for a hire - which it is sadly in many startups these days.</li><li><u>Right kind of ambition: </u>You are looking for people with the right kind of ambition. So people that love your idea, bring a “get shit done mentality to work” and that thrive to make your company successful. As a side effect it will help them grow their career - not the other way around.</li><li><u>Right kind of person: </u>You are not looking for “the Facebook Head of Sales” or the “CMO from Google”. Even though those guys do an amazing job at their current companies, every company is different and every time in every company is different. You need to find the right candidate for your company at this time. So one of your challenges is to make sure that your candidate has the right skillset for YOUR COMPANY.</li></ul><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-3WGbQ7pb23o/VhQtpfg_SvI/AAAAAAAAAao/aKu1Weny7PM/s1600/The_Importance_of_doing_reference_checks_-_Google_Docs.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><br /></a></div><br />I guess I don’t have to tell you how big the impact of a bad hire can be for your organisation. Simply do the math. Really do it! Sit down and calculate how much time and money it takes you to get rid of the wrong hire and find a new person and tell the people that you are sorry rather than using this time to talk to 5 people for 10 minutes upfront. If you do that math correctly you’ll figure out that doing reference checks is going to be the easy, cheap and most efficient way for busy startups to get the right people on their rocket ship!<br /><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-22664508405977636912015-10-03T11:37:00.002+02:002015-10-06T22:18:02.505+02:00PNC SaaS Founder Meetup, Edition #4<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-2k9QsN1_o1I/Vg6Ude42dnI/AAAAAAAAAaI/1hVQsU169VM/s1600/_20__Point_Nine_Capital.png" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="177" src="http://1.bp.blogspot.com/-2k9QsN1_o1I/Vg6Ude42dnI/AAAAAAAAAaI/1hVQsU169VM/s200/_20__Point_Nine_Capital.png" width="200" /></a></td></tr><tr><td class="tr-caption" style="font-size: 13px; text-align: center;">Jack Newton, co-founder &amp; CEO of Clio,&nbsp;at<br />the 1st PNC SaaS Founder Meetup in 2012</td></tr></tbody></table>About three years ago we thought that it would be nice to organize a little meetup for the founders of our still quite young but growing SaaS portfolio. The idea was that by putting all of the SaaS founders in one room for a day, we'd give them an opportunity to compare notes, share war stories and learn from each other. The result has been nothing short of amazing. After the meetup, many of the attendees told us that they've never attended an event which was nearly as useful as this one, and everyone left the meetup energized and eager to implement all the new learnings.<br /><br />The success of the first meetup, which took place in San Francisco at the end of 2012, encouraged us to do <a href="http://christophjanz.blogspot.de/2013/11/impressions-from-pnc-saas-founder.html">another, bigger event in 2013 in Berlin</a> and <a href="http://christophjanz.blogspot.de/2014/10/impressions-from-saas-nirvana-aka-as.html">an even bigger one in 2014, again in San Francisco</a>. By now it has become a tradition, and last week the 4th annual PNC SaaS Founder Meetup took place in Berlin. Thanks to all the great people from our portfolio and our guest speakers it has once again been fantastic. <a href="https://www.facebook.com/media/set/?set=a.940142449389737.1073741829.155820287821961&amp;type=1&amp;l=763becb49e">Here are some (visual) impressions.</a><br /><br />One of the reasons why the event is so effective is that it gives early-stage SaaS founders an opportunity to learn from later-stage SaaS founders and other SaaS experts who have already been through many of the challenges faced by the early-stage guys. Especially for founders from Europe and other places outside of the Bay area, this is a pretty unique opportunity to learn from some of the best people who've done it before. Therefore we're incredibly grateful to people like Mikkel Svane (co-founder &amp; CEO of Zendesk), Jack Newton (co-founder &amp; CEO of Clio), Paolo Negri (co-founder &amp; CTO of Contentful), Olly Headey (co-founder &amp; CTO of FreeAgent) and many others who participated in the first meetup in 2012 and keep coming to the PNC SaaS Founder Meetups ever since. Thanks guys, the startup world is a better place with you in it. :-)<br /><br />PS: If you're a co-investor or friend of Point Nine and wondered why you didn't get an invitation this year: It's nothing personal, we've made it a portfolio-only event this time.<br /><br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-29412247652634631632015-09-30T17:30:00.000+02:002015-09-30T17:40:51.065+02:00Introducing Jenny Buch, Talent Manager at Point NineOnce a startup has released the first version of its product, raised some funding, started to get the word out and is getting some traction, the biggest challenge almost always becomes hiring. No matter how great the founders are and how much good advice they get from investors and advisors: You need people to get <del>shit</del> things done. And before long, you need more people (AKA managers) to help other people get <del>shit</del> things done, too. Recruiting great people can be extremely time-consuming and difficult, but if you don’t manage to build a great team, you are guaranteed to fail.<br /><br />Or, as <a href="https://twitter.com/michaelrwolfe">Michael Wolfe</a> put it in his awesome talk at our 4th annual SaaS Founder Meetup last week:<br /><br /><div style="text-align: center;"><b>All companies start differently but end up the same:</b></div><div style="text-align: center;"><b>Success depends on hiring and managing a great leadership team.</b></div><br />Given that hiring is the #1 challenge for almost all of our portfolio companies, it has always bugged me that we’re not better at helping our founders find great people. It’s not like we haven’t been trying it and sometimes we’ve been able to find someone in our network for an open position at a portfolio company. But I’ve always wished that we’d be able to provide much more help.<br /><div><br /></div><div><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-QEWaWPc7rEI/Vgv3bBoslhI/AAAAAAAAAZ8/l9qHkI_u838/s1600/g12je.gif" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto; text-align: center;"><img border="0" height="200" src="http://1.bp.blogspot.com/-QEWaWPc7rEI/Vgv3bBoslhI/AAAAAAAAAZ8/l9qHkI_u838/s200/g12je.gif" width="165" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Jenny sent me two pics ... and<br />forgot&nbsp;to tell me that I should pick one. ;-)</td></tr></tbody></table>That’s why we’re thrilled that we’ve hired an experienced recruiter with a strong network, Jenny Buch, to focus on this challenge full-time. In her role at Point Nine, Jenny will (besides taking care of internal HR issues) advise our portfolio companies on anything related to recruiting, culture, employee engagement and HR strategy and will help them hire awesome people. In her previous roles, Jenny has recruited dozens if not hundreds of people for fast-growing tech startups and we can’t wait to see her magic unfold in the Point Nine family.<br /><br />Welcome, Jenny!</div><div><br /></div><div>PS: Hiring a talent manager isn’t a new idea in the VC world, and large firms like A16Z have built <a href="http://a16z.com/team/">big teams</a> to support their portfolio companies in a variety of areas. We can't compete with that, but we’re a little proud that we’re one of the first (the first?) micro VC funds to invest heavily into this role. :)<br /><br /><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-5228735910261091272015-09-28T18:14:00.000+02:002015-09-28T18:15:19.103+02:00What animals are WE hunting?[This article&nbsp;first appeared as a <a href="http://venturebeat.com/2015/09/27/what-animals-are-micro-vcs-hunting/">guest post on VentureBeat</a>. Thank you for publishing it, VentureBeat. I'm re-posting it here with a few small edits.]<br /><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-5xbt7TLLp-U/Vglm4pi23hI/AAAAAAAAAZc/Nkaz-RKcehQ/s1600/Unicorn_Cartoon-784229.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://3.bp.blogspot.com/-5xbt7TLLp-U/Vglm4pi23hI/AAAAAAAAAZc/Nkaz-RKcehQ/s1600/Unicorn_Cartoon-784229.png" /></a></div>Of all posts that I’ve written so far, the one in which I asked <a href="http://christophjanz.blogspot.de/2014/10/five-ways-to-build-100-million-business.html">what kind of animals you’re hunting</a> was one of the most popular ones. That begs the question: What kind of animals are <i>we</i> hunting?<br /><br />Paul Graham wants to farm black swans. Dave McClure likes ugly ducklings, little ponies and centaurs. Almost all large VC funds are looking for unicorns, while some people argue that investors should hunt dragons and others talk about decacorns.<br /><br />If you have no idea <i>WTF</i> I’m talking about, here’s a quick refresher. The term unicorn was <a href="http://techcrunch.com/2013/11/02/welcome-to-the-unicorn-club/">coined by Aileen Lee about two years ago</a> to describe those rare and magical tech startups that have reached a valuation of $1 billion or more. Since then, $1B valuations have become somewhat less rare and there are now several private tech companies valued at $10 billion or more, for which the industry has come up with another name: <a href="http://uk.businessinsider.com/decacorn-is-the-new-unicorn-2015-3?r=US&amp;IR=T">decacorns</a>. Before unicorns were called unicorns, people used to call these rare outlier companies, which create massive returns for their early investors, <a href="http://www.paulgraham.com/swan.html">black swans</a> (or homeruns – back then, it wasn’t mandatory to borrow terms from the animal kingdom). <a href="https://web.archive.org/web/20150201215446/http://500hats.com/screw-the-black-swans">Duckling</a> is Dave McClure’s name for companies that don’t become quite as as huge, and <a href="https://twitter.com/davemcclure/status/602195986006601728">ponies</a> and <a href="https://twitter.com/davemcclure/status/602195986006601728">centaurs</a> is what he calls the ones that have reached valuations of $10 million and $100 million, respectively. Finally, a <a href="http://techcrunch.com/2014/12/14/unicorns-vs-dragons/">dragon</a> is a company that returns an entire VC fund.<br /><br />So – what I mean by the question in the title of this post is what kind of exits we are aiming for. It’s a question which every VC needs to think about: If you have, say, a $250M fund and your goal is to return $1B before costs, should you aim for one huge outlier, e.g. a $10B exit in which you own 10%? Or are you better off shooting for 20% stakes in 50 companies which exit at $100M each? Or something in between?<br /><br />For large funds the answer is pretty clear. Although the number of smaller exits is of course much bigger than the number of large exits, the exit value is highly concentrated on a small number of huge winners. This power law distribution of venture returns, <a href="http://blakemasters.com/post/21869934240/peter-thiels-cs183-startup-class-7-notes-essay">which Peter Thiel has spoken about extensively</a>, is what makes it almost impossible to return a large fund without hitting one or more outliers. Or as Jason M. Lemkin put it: <a href="https://www.saastr.com/why-vcs-need-unicorns-just-to-survive/">VCs need multiple unicorns just to survive</a>.<br /><br />But what about a small (~$60M) early-stage fund like ours? We spent a lot of time thinking about this question in the last years, and our conclusion – or, let’s say working assumption, because it’s still early days for us – is that (sticking to the terminology described above) we’re <b>hunting for dragons, hoping for unicorns</b>.<br /><br />In spite of the growing number of unicorns in the last years it’s still exceedingly rare for a startup to reach a valuation of $1B or more. According to <a href="http://techcrunch.com/2015/07/18/welcome-to-the-unicorn-club-2015-learning-from-billion-dollar-companies/">Aileen Lee’s research</a>, only 0.14% of venture-backed tech startups become unicorns. We can make around 30-40 investments with our fund, so statistically the chances of hitting a unicorn are very low. That doesn’t mean that we’re not trying hard to beat the odds – and if you don’t believe that you can beat the odds you should never become a founder or a VC in the first place – but it means that our business model is not dependent on having a unicorn in every fund that we raise.<br /><br />We’re small enough for not being dependent on unicorns, but – and that’s the big difference to angel investing – we’re too big for generating a great performance by piling up a larger number of small exits. If we tried to get to, say, $240M in exit proceeds in chunks of $10M (corresponding with e.g. 20% of a $50M exit) we’d need 24 of these exits. It’s not realistic that 60-80% of the companies, in which we invest at a stage when there’s often just a handful of people and a few thousand dollars in revenues, will go on to become $50M exits though. That’s why we need a few of the animals which in the beginning of this post have been called dragons and which we internally just call “fund-makers”: Investments which return an entire fund, which in our case means, for example, 20% of a $300M exit or 15% of a $400M exit.<br /><br />The final question is if all of this has any practical implications at all. Isn’t it impossible to look at a seed-stage startup and predict how large it can become anyway? Those are very hard prediction to make indeed, but still, knowing what kinds of exits we need informs several important decisions that we have to make – how many companies we want to invest in, what ownership stakes we’re aiming for, how much capital we reserve for follow-on financings, and so on. It also makes it clear that we shouldn’t invest in companies which for some reason we feel don’t have enough potential to move the needle for our fund.<br /><br />The very last thing I want to say, just to be sure that I’m not misunderstood, is that I have absolutely nothing against unicorns. :-) In fact, we love ‘em. We’ve found two so far, Zendesk and Delivery Hero, so we’ve seen the beautiful side of the power law distribution first-hand. So: Hunting for dragons, hoping for unicorns.<br /><br /><br />Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-46182923597748515862015-08-27T05:37:00.000+02:002015-09-09T00:28:49.377+02:006 reasons to be bullish on SaaS<a href="http://christophjanz.blogspot.com/2015/08/is-saas-doomed.html">Yesterday I argued</a> that SaaS founders and investors shouldn’t worry about short-term movements of SaaS stocks and said that there are a lot of reasons to be bullish about the Cloud. Here are some of them.<br /><br /><b>1) SaaS is quickly becoming the norm</b><br />In the last years there’s been a dramatic shift in deployment preferences of software buyers. According to a survey by technology evaluation business <a href="http://www.softwareadvice.com/">Software Advice</a>, <a href="http://www.softwareadvice.com/buyerview/deployment-preference-report-2014/">88% of buyers</a> with a deployment preference preferred on-premise solutions in 2008. Just six years later, the results were completely upside-down: In 2014, 87% of all buyers with a deployment preference preferred Cloud solutions.<br /><br /><b>2) Billions of dollars of on-premise revenues are still up for grabs</b><br />In spite of this tectonic shift of deployment preferences, <a href="http://www.forbes.com/sites/louiscolumbus/2014/12/20/idc-predicts-saas-enterprise-applications-will-be-a-50-8b-market-by-2018/">IDC estimates</a> that in 2015 the market share of on-premise deployments in the enterprise applications market is still almost 80%. That means that billions of dollars will move from on-premise to the Cloud in the next ten years.<br /><br /><b>3) Millennials will move up through the ranks</b><br />In the near future, more and more IT decision maker positions will be taken over by millennials. For this generation, which grew up with Facebook and Gmail, SaaS will be the default choice. In fact, most of them will laugh at the idea that software could <i>not</i> be Cloud-based.<br /><br /><b>4) The entire software market will continue to grow</b><br />It’s not only about increasing the Cloud’s piece at the expense of the on-premise piece, though. Pen &amp; paper or Excel sheets are still used by myriads of people for all kinds of business processes, especially in SMBs. Building better, Cloud-based solutions for these use cases will significantly increase the size of the total software cake.<br /><br /><b>5) Mobile expands the market to non-desk workers</b><br />About ten years ago, the number of smartphone users was negligible. Today there are more than two billion smartphone users worldwide. This development, which I think is nothing short of amazing, has (almost) suddenly increased the number of target users for B2B software companies by tens of millions in the industrialized countries alone. People in industries like construction, landscaping, hospitality and many other areas of “non-desk work”, who previously weren’t using any software, are now getting mobile apps that help them become more efficient. <br /><br /><b>6) New technologies will catalyze adoption</b><br />SaaS has always been more than just a better deployment option. It has enabled the creation of new ecosystems (Salesforce.com), new business models (Zenefits), new distribution strategies (Zendesk) and much more. The next wave of enterprise software will likely be powered by machine learning (check out <a href="http://techcrunch.com/2015/07/27/the-next-wave-of-enterprise-software-powered-by-machine-learning">this TechCrunch post</a> for a good primer) and continued <a href="http://www.forentrepreneurs.com/consumerization-of-the-enterprise-phase-2/">consumerization</a> (<a href="https://medium.com/point-nine-news/haas-an-investment-thesis-for-hardware-startups-e3500c8d7007">and in some cases, new hardware</a>). These and other innovations will allow SaaS applications to get even wider adoption and to provide even more value to its customers.<br /><br />This is by no means meant to be an exhaustive list, and there are many more reasons to be bullish on SaaS. <b>Want to let me know what you’re most bullish about? <a href="http://ctt.ec/kmU1K">Tweet it to me!</a></b><br /><div><b><br /></b></div><div><b><br /></b></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-46913674719145742332015-08-25T05:34:00.000+02:002015-08-25T05:43:12.359+02:00Is SaaS doomed?If one looks at the stock price development of public SaaS companies in the last few weeks, one could come to the conclusion that SaaS is over the hill. Salesforce.com: 17% down from its 52 week high. Veeva: 30% down from its 52 week high. Workday is 29% down, Box 47%, Hubspot 22%. Everyone got hit, as you can see in <a href="http://tomtunguz.com/public-correction-impact-saas/">Tomasz Tunguz' post about the topic</a>.<br /><div><br /></div><div>There are several reasons why this conclusion (that SaaS is past its prime) is wrong. Firstly, it's not just SaaS stocks which took a dive. The NASDAQ and the Dow Jones are both down more than 13% from their 52 week highs, too. Secondly, <a href="http://www.bvp.com/cloud/comps">as this chart of the BVP Cloud Computing Index shows</a>, SaaS stocks have outperformed the market significantly in the last couple of years, and it's not surprising that when the market corrects, stocks that went up more strongly than others are going down more strongly as well.</div><div><br /></div><div>More importantly though, while public markets are good at valuing companies in the very long run, short term movements are – if not <a href="https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street">random</a>&nbsp;–&nbsp;the result of all kinds of factors, most importantly supply and demand for stocks as an asset class, which itself depend on all kinds of factors that are not related to a specific company's ability to generate profits in the long run. That's why long-term public markets investors – let alone SaaS founders or VCs – shouldn't worry about the short-term movements of SaaS stocks.&nbsp;</div><div><br /></div><div>Fundamentally, there are <i>lot</i> of reasons to be bullish about the Cloud. I'll follow-up on that with another post soon.</div><div><br /></div><div><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-58783118020717479392015-07-17T12:05:00.000+02:002015-07-17T12:05:33.673+02:00The evolution of the SaaS landing pageWhen you look at the landing pages (or homepages or marketing sites, however you want to call them) of today's SaaS companies, they usually look quite beautiful. They typically have a clean, simple and friendly look, with very little text and a lot of images or videos. In many cases, these websites could just as well advertise a consumer product. This doesn't come as a surprise, since the <i>consumerizaton of enterprise software </i>has been one of the most important driving forces in the software world in the last years. But B2B software websites haven't always looked like this and it's fascinating to see <i>how much</i>&nbsp;things have changed. Join me as I go back in time and take a look at how SaaS landing pages looked like some years ago.<br /><br /><b><span style="font-size: large;"><br /></span></b><b><span style="font-size: large;">The SaaS Stone Age</span></b><br /><br />Fast-backward about 16 years. This is how the website of Salesforce.com - the most innovative software company of that time – looked like in 1999:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-0bVkKilXg1A/Vagr-LvzRRI/AAAAAAAAAXY/cAp94-pnGzg/s1600/SFDC1999.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="http://3.bp.blogspot.com/-0bVkKilXg1A/Vagr-LvzRRI/AAAAAAAAAXY/cAp94-pnGzg/s400/SFDC1999.png" width="381" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Salesforce.com in 1999<br />(click for a larger version)</td></tr></tbody></table><br />Interestingly, as horrible as the site looks by today's standards, it does have a bit of a consumer-ish feel and it actually became more enterprise-y over time (you can browse the history on the&nbsp;<a href="http://archive.org/web/">Internet Archive</a>, which I've used to take these screenshots). So maybe in 1999 and the early 2000s the world wasn't ready for consumerization yet, or Salesforce.com didn't figure out the right approach or they just saw more success with a top-down enterprise sales approach.<br /><div><br /></div><div><b><span style="font-size: large;"><br /></span></b><b><span style="font-size: large;">The Beginnings of Modern (SaaS) Times</span></b><br /><br />Not much happened on the SaaS design front in the following years. Until 2004, that is, when a small, Chicago-based web design agency called 37signals launched its project management tool called <a href="http://www.basecamp.com/">Basecamp</a>:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-MGlEO4ZaT24/Vailuxyv0sI/AAAAAAAAAXw/nG5y_tJPDBg/s1600/BC2004.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="373" src="http://2.bp.blogspot.com/-MGlEO4ZaT24/Vailuxyv0sI/AAAAAAAAAXw/nG5y_tJPDBg/s400/BC2004.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Basecamp in 2004<br />(click for a larger version)</td></tr></tbody></table><br />Basecamp looked radically<i>&nbsp;</i>different from any other piece of B2B software. If it's possible to pinpoint the beginning of modern SaaS to a specific company or product, I think this honor is due to <a href="https://twitter.com/jasonfried">Jason Fried</a> and his colleagues at 37signals. As much as I disagree with Jason on many things he writes about how to build a business – kudos to 37signals for their focus on product, design and usability. No other SaaS company had a bigger influence on SaaS design.<br /><br />It took a few years – which shows how much ahead of its time 37signals was – but eventually other SaaS companies redesigned their websites or rebuilt them from the ground up:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-ZiW0IfQuPfg/Vai9hMfIEhI/AAAAAAAAAYg/EO7906EMA3Y/s1600/Email_Newsletter_Software_for_Web_Designers_-_Campaign_Monitor.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="http://2.bp.blogspot.com/-ZiW0IfQuPfg/Vai9hMfIEhI/AAAAAAAAAYg/EO7906EMA3Y/s400/Email_Newsletter_Software_for_Web_Designers_-_Campaign_Monitor.png" width="378" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Campaign Monitor in 2008<br />(click for a larger version)</td></tr></tbody></table><br />The trend was clear: Less and less text, bigger font sizes, larger images, videos. SaaS companies which were founded at that time had a stronger focus on design from the get-go:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-MlF_6MgscmA/Vai4dh6nuMI/AAAAAAAAAYA/ExAvbkyi3xc/s1600/Clio__Online_Legal_Practice_Management_Software___SaaS_for_Lawyers__Attorneys__Law_Firms.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="332" src="http://4.bp.blogspot.com/-MlF_6MgscmA/Vai4dh6nuMI/AAAAAAAAAYA/ExAvbkyi3xc/s400/Clio__Online_Legal_Practice_Management_Software___SaaS_for_Lawyers__Attorneys__Law_Firms.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Clio in early 2009<br />(click for a larger version)<br /></td></tr></tbody></table><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-V1Pn6-nkJTQ/Vai7S09aKnI/AAAAAAAAAYQ/sc0bdevqgU8/s1600/Help_Desk_Software_-_Hosted_Help_Desk_Software_Support_Ticket_Software.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="347" src="http://4.bp.blogspot.com/-V1Pn6-nkJTQ/Vai7S09aKnI/AAAAAAAAAYQ/sc0bdevqgU8/s400/Help_Desk_Software_-_Hosted_Help_Desk_Software_Support_Ticket_Software.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Zendesk in 2010<br />(click for a larger version)</td></tr></tbody></table><b><span style="font-size: large;"><br /></span></b><b><span style="font-size: large;">Contemporary SaaS Design</span></b><br /><br />In the years that followed, the trend towards simplicity, focus on design and consumerization continued, and I'd say that since around 2012 or 2013, having a reasonably beautiful and conversion-optimized marketing website is more or less <a href="http://christophjanz.blogspot.de/2015/01/whats-table-stakes-in-saas-anno-2015.html">table stakes</a>. Today you can buy a <a href="http://themeforest.net/item/cloud-soft-unbounce-landing-page-template/full_screen_preview/11047026">SaaS landing page template for $18</a>. A $18 design which looks better than every B2B website that was built before 2004 – makes me wonder if Moore's law applies in design, too. ;-)<br /><br />Since most people are trend-followers rather than trend-setters, SaaS landing pages started to look more and more alike in the last few years: A navigation bar at the top; 1-2 devices that were made in Cupertino, with product screenshots on them; a large headline and smaller sub-headline; 1-2 call-to-action buttons; some customer logos. This (plus a few other things) was the anatomy of almost every SaaS landing page in 2014. Not bad, don't get me wrong, but if everyone follows that recipe it gets harder and harder to stand out and build something memorable.<br /><br />But just when things started to get boring, some cutting-edge design-led SaaS companies pushed the envelope further:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-Yu9MfmyhNe4/VajIfe9Y3jI/AAAAAAAAAYw/rhA_Sq0U9oI/s1600/Data_dashboards_for_businesses___Geckoboard.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="296" src="http://1.bp.blogspot.com/-Yu9MfmyhNe4/VajIfe9Y3jI/AAAAAAAAAYw/rhA_Sq0U9oI/s400/Data_dashboards_for_businesses___Geckoboard.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Geckoboard's current website<br /><a href="https://www.geckoboard.com/">Go to www.geckoboard.com to see it live</a></td></tr></tbody></table><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/--zNRuWMQPDU/VajJfeAsJpI/AAAAAAAAAY4/S1Cmy0BGQKQ/s1600/Forms_Done_Awesomely___Typeform.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="318" src="http://3.bp.blogspot.com/--zNRuWMQPDU/VajJfeAsJpI/AAAAAAAAAY4/S1Cmy0BGQKQ/s400/Forms_Done_Awesomely___Typeform.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Typeform's current website<br /><a href="http://www.typeform.com/">Go to www.typeform.com to see it live</a></td></tr></tbody></table><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-V-oDCVRg01M/VajK6gjiCII/AAAAAAAAAZE/zrXrtEd_wjw/s1600/Forms_Done_Awesomely___Typeform.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://4.bp.blogspot.com/-V-oDCVRg01M/VajK6gjiCII/AAAAAAAAAZE/zrXrtEd_wjw/s400/Forms_Done_Awesomely___Typeform.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Another view of Typeform's current website<br /><a href="http://www.typeform.com/">Go to www.typeform.com to see it live</a></td></tr></tbody></table><br />Both examples make heavy use of video so the screenshots don't do them justice. Please go to <a href="http://www.geckoboard.com/">Geckoboard</a> and <a href="http://www.typeform.com/">Typeform</a> to see them in action. While still being focused on conversion, I think these websites are almost indistinguishable from art. Using high-quality video footage, very little text and beautiful typography, crafted with incredible attention to detail, these websites bring across a &nbsp;value proposition in a fresh, unique and highly emotional way.<br /><br />This little journey through time has shown that up until now, the evolution of the SaaS landing page has been a development towards ever more simplicity. It will be interesting to see if this trend continues in the coming years.<br /><br /><br /><span style="font-size: x-small;">Disclosure: I'm an investor in Clio, Zendesk, Geckoboard and Typeform.</span><br /><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0tag:blogger.com,1999:blog-18867375.post-11050623603547618552015-06-25T11:48:00.000+02:002015-06-25T11:48:50.960+02:00By the time you're at $2-3M in ARR, you need a VP of Sales who's done it beforeFor most SaaS startups, the VP of Sales (along with the VP of Marketing) is one of the most crucial hires they need to make. Unless you have a no/low touch sales model and you're growing virally (a.k.a. you're successfully&nbsp;<a href="http://christophjanz.blogspot.de/2014/10/five-ways-to-build-100-million-business.html">hunting flies or mice</a>), someone needs to build a scalable sales organization, whether it's an inside sales team (a.k.a. <a href="http://christophjanz.blogspot.de/2014/10/five-ways-to-build-100-million-business.html">hunting rabbits or deer</a>) or a field sales team (a.k.a. <a href="http://christophjanz.blogspot.de/2014/10/five-ways-to-build-100-million-business.html">hunting elephants</a>).<br /><br />It's also one of the toughest hires. Jason M. Lemkin gave an epic talk about the subject at our <a href="http://christophjanz.blogspot.de/2014/10/impressions-from-saas-nirvana-aka-as.html">3rd annual SaaS Founder Meetup, last year in San Francisco</a>. Jason also wrote extensively about the topic on <a href="http://www.saastr.com/">SaaStr</a>. If you haven't read his articles yet, make sure you read all of them.<br /><br />As Jason explained <a href="http://www.saastr.com/the-48-types-of-vp-sales-make-deadly-sure-you-hire-the-right-one/">in this post</a>, one of the things that makes hiring the right VP of Sales so hard is the timing. If you try to hire your "Mr. Make it Repeatable" or your "Ms. Go Big" VP of Sales <i>too early</i>, say at $500k in ARR, you'll almost certainly not get a great one. The reason is that a great one will most likely not leave his or her current position at a successful, fast-growing, well-funded SaaS company, which pays him or her hundreds of thousands of dollars in salary and bonus/commission per year, to join your tiny little startup.<br /><br />Starting to look for your VP of Sales <i>too late</i> is equally dangerous, though. If you want to grow roughly in line with the <a href="http://christophjanz.blogspot.de/2015/03/how-fast-is-fast-enough.html">T2D3 formula</a>, which most venture-funded SaaS startups should shoot for, you need to hire a lot of sales people in year 3. An exception are SaaS startups with a no/low-touch sales model and viral growth (see above) and potentially companies which have a <i>massively</i> negative net MRR churn rate and therefore don't have to acquire as many new customers. If you're fortunate to be in one of these categories, you may not need a big sales team, but most SaaS companies aren't.<br /><br />That's why I think most SaaS companies that don't have sales management experience in the founder team need to start looking for a VP of Sales by the time they're at around $1.5-2M in ARR so that by the time they're at around $2-3M, they've recruited a VP of Sales who can take them to $10M and beyond. My thinking becomes clearer if you take a look at this model, which calculates how many sales people you need to get from, say, $1M in ARR to $10M. Note that a big and productive sales team may be <i>necessary</i> to achieve that goal, but it's obviously not <i>sufficient</i>. You also need a great product, great marketing, etc. – otherwise your sales team won't have enough warm leads and closing them will be too hard.<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-PvLHkzmquNY/VYu3tHgQAEI/AAAAAAAAAW4/MzLC3bJB26A/s1600/Screenshot_25_06_15_10_11.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="145" src="http://1.bp.blogspot.com/-PvLHkzmquNY/VYu3tHgQAEI/AAAAAAAAAW4/MzLC3bJB26A/s400/Screenshot_25_06_15_10_11.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">(click for a larger version)</td></tr></tbody></table><br /><b><a href="https://www.dropbox.com/s/7e34c75h3iytkwp/SaaSSalesTeamHiringPlan.xlsx?dl=0">Click here to download the Excel sheet.</a></b><br /><br /><b><u>Here's how the model works:</u></b><br /><br /><ul><li>Enter your <b>current ARR</b> in cell D10. You can of course also enter your ARR target for a future date, depending on what you want to calculate. In the template, I'm assuming that you're at or close to the end of year 1 and want to work out your hiring plan for year 2 and year 3.</li><li>Enter the <b>monthly growth rate</b> that you're targeting for year 2 and year 3 in cells D11 and D12, respectively. Note that this should be your "net MRR/ARR growth rate", which takes into account all MRR movements like churn, expansion or contraction. The sample data that I've put in reflects the T2D3 formula (grow to $1M in ARR in year 1, triple in year 2 and triple again in year 3).</li><li>Input your <b>monthly net MRR churn rate</b> (i.e. [churn MRR plus contraction MRR] minus [expansion MRR plus reactivation MRR]) in cell D13.</li></ul><div><br /></div><div>Using these inputs, the spreadsheet will calculate the new ARR from new customers that you have to acquire in order to meet your growth targets. See row 25.</div><div><br /></div><div>Now ... how many sales people do you need to achieve these target numbers? This depends on the following inputs:</div><div><br /></div><div><ul><li>Your <b>AEs' quota</b>, i.e. how much new ARR you expect each AE to bring per month. The model assumes that your AEs will <i>on average</i> meet their quota. In reality, some of your sales people won't meet their quota and some will exceed it, so this number really is just the average which you expect to achieve.</li><li><b>Ramp-up time</b>, i.e. the time it takes your AEs to reach full productivity. The model assumes that they're 100% productive in month 4. For months 1-3, you can enter different percentages in cells G10-12.</li><li>The size of your <b>sales support team</b>. In cells K10-14 you can enter how many Sales Directors, SDRs and SDR Directors you expect you'll need in proportion to the number of AEs.</li></ul><div><br /></div></div><div>The sample numbers that I'm using in the template are broadly in line with the results of <a href="http://blog.bridgegroupinc.com/hubfs/resources/Periodic_Table_Inside_Sales.pdf">this benchmarking survey</a>. As you can see in the spreadsheet and in the chart, based on these assumptions your total sales headcount increases from 2 to 9 in year 2 and from 9 to 30 in year 3. So in year 3 you'll have to hire and train 21 new sales people (plus replacements for people that leave or are let go).&nbsp;</div><div><br /></div><div>Without a VP of Sales who has built and scaled a sales team before, that's tough.&nbsp;</div><div><br /></div><div><br /></div><div>PS: As you can see in the chart below, there's a 1:1 correlation (approximately) between ARR and sales headcount. That's OK in the $1-10M ARR stage, but in the longer term the best SaaS companies manage to grow revenues faster than sales spendings, primarily by focusing on account expansions to achieve an ever-increasing negative MRR churn rate and by continuously getting up sales efficiency.</div><div><br /></div><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/--1Wwf1vKqDE/VYvJLVTCvhI/AAAAAAAAAXI/1Yt6uQsQDaQ/s1600/Screenshot_25_06_15_11_20.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="232" src="http://4.bp.blogspot.com/--1Wwf1vKqDE/VYvJLVTCvhI/AAAAAAAAAXI/1Yt6uQsQDaQ/s400/Screenshot_25_06_15_11_20.png" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">(click for a larger version)</td></tr></tbody></table><div><br /></div><div><br /></div>Christoph Janzhttp://www.blogger.com/profile/07905463949262014311noreply@blogger.com0